XRP surges 25% at the start of the year, outperforming Bitcoin; four key reasons why it becomes the "hottest trading" in 2026

At the beginning of 2026, the cryptocurrency market experienced significant sector rotation. Ripple’s payment token XRP surged by 25% in the first week of the year, far outperforming Bitcoin’s 6% increase and Ethereum’s 10% rise during the same period. CNBC hosts called it the “hottest crypto trading of the year.” Behind this strong performance are multiple positive factors resonating together: continuous net inflows into spot ETFs, improvements in on-chain fundamentals, positive social sentiment, and Ripple’s ongoing global partnerships and regulatory progress.

Meanwhile, the recent massive funding received by Elon Musk’s xAI company has shifted market attention and capital toward artificial intelligence, further highlighting the unique appeal of established projects like XRP that have clear practical value and regulatory progress in the current market environment.

XRP Leads the Year: The Strong Performance Behind the Data

Entering 2026, the crypto market did not continue last year’s subdued pattern but was led by XRP to ignite an upward trend. In the first six trading days of January, XRP’s price soared 25%, achieving an impressive start. This rally left major cryptocurrencies far behind—Bitcoin up 6%, Ethereum up 10%. Such a strong start not only made XRP a market focus but also earned it the title of “crypto’s new favorite in the new year.” CNBC’s Power Lunch host Brian Sullivan even stated, “This year’s hottest crypto trade isn’t Bitcoin or Ethereum, but XRP.”

This robust price performance is supported by solid on-chain activity and capital flows. According to XRPscan data, over the past two weeks, XRP’s network activity and trading volume increased by more than 50%, indicating a significant rise in ecosystem engagement. Meanwhile, a key on-chain indicator also signals a bullish outlook: CryptoQuant data shows XRP reserves on major centralized exchanges have fallen to their lowest level in two years. Typically, decreasing exchange reserves suggest investors are transferring tokens to private wallets for long-term holding rather than preparing to sell at any moment, easing immediate market sell pressure.

More notably, unlike the traditional “buy the dip and sell the rally” pattern, this round of XRP rally appears to have been strategically pre-positioned. CNBC pointed out that during last year’s Q4 market downturn, many investors contrarily bought XRP ETFs, contrary to the usual pattern where Bitcoin and Ethereum ETF funds fluctuate in tandem with their prices. This “left-side” positioning proved to be highly foresightful; investors believed XRP was a “less crowded trade” with potential for higher percentage gains, a view validated at the start of 2026.

Key Data Overview for XRP’s 2026 Start

Price Performance: +25% in the first week

Comparison: Significantly outperforms Bitcoin (+6%) and Ethereum (+10%)

ETF Capital Flows: Nearly $100 million net inflow since the start of the year, total inflow reaching $1.15 billion with no single-day net outflows

On-Chain Activity: Network trading volume up over 50% in two weeks

Exchange Reserves: Dropped to two-year lows

Market Sentiment: AI analysis shows retail and “smart money” sentiment are both bullish

Four Engines Driving the Rally: Analyzing the Internal Logic of XRP’s Strength

XRP’s early-year surge is not without foundation but driven by four key engines: strong spot ETF demand, positive market sentiment, solid on-chain fundamentals, and strategic corporate developments.

First, spot ETFs provide a steady institutional buying channel. According to Coinglass data, four spot XRP ETFs have recorded nearly $100 million in net inflows since the start of the year, with Monday, January 6, experiencing the largest single-day inflow in over five weeks. More convincingly, since their launch, these ETFs have accumulated $1.15 billion in inflows, with no recorded single-day net outflows. This “in-only” stable capital flow creates a rare price stabilizer and confidence foundation amid volatile crypto markets.

Second, market sentiment has turned fully optimistic. Market Prophit, an AI-based social sentiment analysis firm, indicates that both “public sentiment” and “smart money sentiment” toward XRP are bullish. This positive sentiment cycle reinforces the price rally. Additionally, the previously mentioned decline in exchange reserves confirms, from a behavioral finance perspective, that holders are reluctant to sell, further strengthening bullish expectations.

Third, Ripple’s corporate expansion and regulatory compliance progress. Recently, Ripple Labs announced partnerships with several major Japanese financial institutions, including Mizuho Bank, SMBC Nikko Securities, and Securitize Japan, aiming to promote XRP ledger adoption in Japan. This expansion in East Asia adds an important piece to its payment network strategy. In the crucial US market, Ripple received conditional approval from the Office of the Comptroller of the Currency (OCC) last December to establish Ripple National Trust Bank. This milestone is seen as a significant step in integrating into traditional finance and meeting strict regulatory standards.

Finally, Ripple’s solid financial position supports long-term growth. Ripple President Monica Long recently told Bloomberg that the company’s funding round completed last November and its valuation of $40 billion are “very positive and advantageous” for Ripple, but there are no immediate plans for an IPO. This indicates the company has ample capital reserves to execute its strategy without the pressure to go public, allowing for a more flexible and long-term development pace.

Market Paradigm Shift: From Meme Frenzy to Practical Value and AI Narratives

XRP’s remarkable performance occurs amid a subtle paradigm shift in the crypto market. On one hand, extreme speculative hype on meme coins on chains like Solana is gradually retreating after a frenzy; on the other hand, new technology narratives like AI integrated with blockchain are attracting massive capital—Elon Musk’s xAI company, for example, has recently completed funding rounds totaling hundreds of billions of dollars. Against this backdrop, XRP’s rise reveals an increasingly clear market trend: a revaluation of mature projects with real-world utility, clear compliance pathways, and solid financial fundamentals.

The AI funding frenzy is highly symbolic. In late 2025, xAI completed funding rounds of $10 billion and $20 billion, with investors including Nvidia, SpaceX, and other industry giants. The funds will be used to build large GPU clusters (aiming for 1 million Nvidia H100 GPUs) to train AI models. This wave of AI investment directly impacts the crypto market, boosting trading volumes of AI-related tokens like Render (RNDR), focused on decentralized GPU rendering. Capital is flowing into frontier technologies that promise future productivity on an unprecedented scale.

However, the surge in AI narratives does not siphon all capital; instead, it diversifies market styles. While some funds chase high-volatility, high-risk future tech narratives, others seek projects with more stability and fundamental support, such as XRP. Unlike many meme coins or early AI concept projects lacking real products or revenue, Ripple’s cross-border payment solutions are already tested or adopted by hundreds of financial institutions worldwide. Its latest national trust bank license further opens the door to the trillion-dollar traditional financial market. A recent PwC report also recognizes Ripple’s growing importance in global financial infrastructure, emphasizing its expansion from a mere crypto project to real-world payments and institutional finance. Endorsements from top-tier third-party institutions greatly boost institutional investor confidence.

Thus, the current market can be seen as running two parallel main lines: one representing frontier tech breakthroughs and infinite imagination (“AI + blockchain”), and the other representing practical implementation, compliance, and real-world value (“financial infrastructure”). XRP’s explosive start in early 2026 is a clear signal that the latter narrative is gaining strong institutional support.

Sector Rotation Opportunities: Besides XRP, What Other Directions Are Worth Watching?

XRP’s strong start signals the beginning of the annual sector rotation in crypto. Under the dual narratives of AI and practical value, investors should pay attention to several sectors and directions that may interact:

1. Crypto assets linked to traditional financial giants: XRP’s strength partly stems from Ripple’s breakthroughs in compliant finance. This logic may spill over into other projects with deep ties to traditional finance giants or progress in regulatory licensing. For example, blockchain projects actively applying for specific financial licenses or establishing formal partnerships with large banks or payment firms could be favored. Investors should monitor substantive announcements regarding regulatory progress and banking collaborations.

2. High-throughput payment and settlement public chains: Ripple’s core narrative is efficient, low-cost cross-border payments. This positions it in a competitive track with other public chains focused on increasing transaction processing capacity and aiming to become the infrastructure of the global value internet. Public chains with significant advantages in speed, cost, and stability, especially those with real commercial use cases (particularly in cross-border payments, remittances, micro-payments), may benefit from increased market focus on “practicality.”

3. AI and blockchain integration frontier: Although XRP itself is not an AI project, market attention on xAI’s massive funding rounds will sustain interest in “AI + crypto.” Besides decentralized computing networks like Render, other sub-sectors worth watching include:

• Decentralized data and AI model markets: Platforms for secure data exchange and AI model rights, addressing data provenance and ownership issues.
• AI-driven DeFi and trading protocols: Advanced DeFi protocols utilizing AI for investment strategies, risk management, or automated market making.
• Blockchain-enabled AI auditing and compliance: Using blockchain’s immutability and transparency to provide verifiable audit trails for AI training data and decision processes, aligning with trends like Nvidia’s confidential computing to protect AI IP and security.

Investment Insights and Risk Outlook: How to Find Certainty Amid Volatility?

In the face of intense sector rotation since the beginning of the year, investors need to establish clear investment frameworks and risk awareness while seizing opportunities.

For XRP and similar assets, the investment logic has shifted from simple “concept speculation” to “fundamental-driven.” Key indicators to monitor include:

1. Regulatory progress: Track the final approval of Ripple National Trust Bank and regulatory attitudes in other jurisdictions toward similar activities.
2. Business data: Observe RippleNet transaction volumes, the number and scale of corridors using its On-Demand Liquidity (ODL) service, and other real business metrics.
3. Capital flows: Continuously monitor XRP ETF inflows and outflows as the most direct window into institutional sentiment.
4. Market sentiment and technicals: After rapid gains, beware of short-term profit-taking pressure. Watch key support levels and exchange reserve changes to avoid chasing highs.

For emerging narratives like AI, investment is more forward-looking and high-risk. Investors should:

1. Differentiate stories from substance: Carefully assess whether projects have feasible technology, capable teams, and clear roadmaps, rather than just riding hot topics.
2. Focus on technological integration points: Seek projects that genuinely address AI pain points (e.g., data privacy, model ownership, compute costs) using blockchain, rather than superficial combinations.
3. Understand valuation and risk: Many AI crypto projects are still in early stages, with fuzzy valuation models and high volatility. Allocate only high-risk capital and be prepared for potential zeroing.

Systemic risks cannot be ignored. Whether XRP or AI tokens, their performance ultimately depends on macro factors like Bitcoin’s trend and the overall crypto market environment. Global macroeconomic conditions, regulatory policies, and USD liquidity remain the Damocles sword hanging over all crypto assets. In 2026, the market is expected to continue oscillating between “enthusiasm for frontier tech” and “return to practical value,” creating complex sector rotation patterns. In such a market, sticking to your investment logic, managing asset allocation, and risk control are more important than chasing every short-term hot spot. XRP’s early-year rally may well be the first prominent note in this new chapter.