These funds are already a stunning success.
As of Dec. 4, five exchange-traded funds (ETFs) tied to XRP (XRP +2.89%) controlled about $985 million in assets, putting the group just a short hop away from having $1 billion in assets under management (AUM). Given that these funds launched just a few weeks ago, and also that plenty more are on the verge of launching, this quick influx of capital shows that there’s a lot of demand.
I predict that within a couple of quarters, these ETFs will surpass a total of $5 billion in assets. Here’s why that’s plausible, and what it means for XRP investors.
Image source: Getty Images.
The $1 billion mark is coming up fast
Today, XRP ETFs control roughly 0.4% of the coin’s 100 billion maximum supply, and about 0.7% of the current circulating supply of 60.3 billion coins. At the same time, XRP itself has a market cap of about $130 billion at recent prices, putting it firmly in large-cap territory in crypto. So while roughly $1 billion in new inflows in just a couple of weeks hasn’t been enough to buoy the crypto’s price, as it represents just a sliver of the market cap, it’s very likely that as time goes by and as inflows continue (assuming they do), the net inflows will actually start to exert an upward pressure on the price.
The ETF lineup came together quickly, and it’s still growing. The first mover was the REX-Osprey XRP ETF (XRPR 3.92%), which launched on Oct. 29 as the first U.S. spot XRP product. It was followed on Nov. 13 by Canary XRP ETF (XRPC 4.01%), which debuted with record first-day flows and quickly established itself as the largest fund in the group. Others have launched since then, and even more are on the way.
Today’s Change
(2.89%) $0.06
Current Price
$2.09
Key Data Points
Market Cap
$126B
Day’s Range
$2.00 – $2.11
52wk Range
$1.65 – $3.65
Volume
3.2B
Avg Vol
0
Gross Margin
0.00%
Dividend Yield
N/A
The inflows have been brisk in all cases, which suggests that there’s plenty of momentum for the inflows to continue at a snappy pace. Canary’s fund alone sits near $357 million in assets. At this rate, it won’t take long for the next $1 billion of net inflows to arrive.
All of that has happened while crypto prices have remained volatile. So, they likely reflect pent-up demand from investors who wanted XRP exposure but were waiting for a simple way to get it, which they now have.
The march to $1 billion is not a fundamental change in XRP by itself, but it is a clear sign that the distribution pipes have been widened significantly. And that’s what makes the next leg of growth to $5 billion in assets under management so probable during the coming months; people have been waiting to invest for years now.
This demand meshes well with the bull thesis
The new ETFs are changing the pattern of who holds XRP and for how long.
When more investors buy ETF shares than sell them, the fund sponsor typically creates new shares. As long as net creations stay positive, ETFs quietly shift XRP from the open market into custodial vaults, where it sits until investors eventually redeem their shares for XRP or sell them in size. Asset managers aren’t in the business of creating volatility by dumping their shares when prices hit a bump in the road, so in the broad view of things, it’s a plus for XRP to be in their coffers.
Given the scale of today’s figures, there’s not a supply shock being caused by this fresh demand for XRP.
Still, if the combined AUM of the ETFs reaches $5 billion during the next few years, the corresponding increase in coins sequestered in ETF structures would represent a more meaningful bite out of the actively traded float. In practice, that could amplify the price impact of any future demand for XRP coming from its use in Ripple’s financial services, like cross-border payment usage, or for the XRP Ledger’s (XRPL’s) capabilities, like managing tokenized assets.
On the other hand, ETF flows are reversible if investors decide to sell their shares. If sentiment turns, inflows can flip into redemptions, pushing XRP coins back into the market instead of soaking them up.
Nonetheless, the odds are good that the XRP ETFs will continue to draw investor attention. Especially if the crypto market starts to perk up soon, the ETFs reaching $5 billion in AUM probably won’t take long at all, and Ripple’s continuing tech development efforts for the XRPL could speed the process along quickly if they end up adding more valuable features to the network.
So if you don’t yet have exposure to XRP, the ETFs are a good way to get it, and they mark a decent expansion to the coin’s investment thesis.