XRP drops 4.86% in the short term: Why are institutional funds continuing to flow against the trend?

XRP experienced a short-term correction on January 7, 2026, with a 24-hour decline of 4.86% to $2.26, reducing its market cap by $7.015 billion. However, behind this correction lies an interesting paradox: while the price is trending downward, institutional funds continue to flow in. This “organic decline” scenario warrants in-depth observation.

Dislocation Between Short-term Correction and Mid-term Trend

Specific performance of price fluctuations

XRP reached a high of $2.41 and a low of $1.81 within 24 hours, with a trading volume of $6.533 billion. Although it fell 4.86% in the short term, over a longer timeframe, it has risen 20.75% in the past 7 days and 8.98% over the past 30 days. This indicates that the current adjustment is more of a technical correction rather than a trend reversal.

Contrarian choice of institutional funds

The most intriguing aspect is the performance of ETF funds. According to the latest data, on January 6, the US spot XRP ETF saw a net inflow of $19.12 million, with Franklin Templeton’s XRPZ fund contributing $7.35 million and Canary XRP ETF contributing $6.49 million. More importantly, this inflow persisted even as XRP’s price faced pressure, fully demonstrating that institutional investors have incorporated XRP into their mid- to long-term allocation framework, viewing it as a structural opportunity rather than a short-term speculative asset.

Three Core Factors Supporting XRP

Continuous tightening on the supply side

The holdings of XRP on centralized exchanges have fallen to about 1.6 billion tokens, hitting a new low since 2018. Although Ripple plans to unlock 1 billion XRP in January 2026, historical data shows that about two-thirds or even four-fifths of unlocked XRP are usually quickly re-escrowed, with limited actual flow into the secondary market. The tightening supply combined with ETF demand creates resonance, providing a solid bottom support for the price.

Substantive breakthroughs in ecological applications

The total value of tokenized real-world assets on the XRP Ledger has exceeded $568 million, with an annual increase of 2200%. Wrapped XRP has been launched on multiple mainstream networks such as Solana, Ethereum, and Optimism. Ripple’s stablecoin RLUSD is also expanding to Ethereum Layer 2 via Wormhole protocol. These developments mark a deep evolution of the XRP ecosystem from a single chain to a multi-chain strategy, creating new application scenarios for real-world asset tokenization.

Positive signals from the international policy environment

Standard Chartered’s global digital asset research head expressed optimism about XRP, expecting its price to rise to $8 by 2026, representing a potential increase of 254% from current levels. The current US president’s public speech emphasizing the modernization of the financial system through faster payment infrastructure and advanced encryption technology is interpreted by the market as a positive signal for blockchain and crypto payment solutions. As an asset designed for cross-border payments, XRP’s technical positioning aligns with the current policy reform directions, showing potential synergy.

Technical signals indicating a bottom

According to related analysis, amid significantly increased trading volume, XRP showed clear “surrender-type selling” near $2.21, but the price did not continue to break down. Although the short-term trend is somewhat weak, the 60-minute chart shows that the $2.258–$2.260 area has formed a short-term defense, with lows gradually rising, hinting that the market is attempting to build a phased bottom.

More notably, the XRP/BTC monthly chart is approaching the upper edge of the Ichimoku cloud, which could be the first effective breakout signal since 2018. Historically, a monthly cloud breakout often indicates that the asset may outperform Bitcoin in the medium to long term. Currently, $2.21 is a key support/resistance level, with the $2.31–$2.32 range above being a critical window for trend reversal.

Deep changes in market structure

Compared to Bitcoin and Ethereum, which have experienced phases of fund outflows, XRP ETF’s contrarian absorption is particularly prominent. This reflects a shift in institutional investors’ allocation logic—from short-term trading to mid- and long-term positioning. Such structural change often signals a new upward cycle after an adjustment in asset prices.

Summary

This short-term correction of XRP is essentially a technical pullback within a mid- to long-term upward trend. Continuous tightening on the supply side, accelerated ecological application deployment, ongoing institutional fund inflows, and gradually friendly policy environment collectively form the mid-term support for XRP. The key support level on the technical side is at $2.21, and breaking through the $2.31–$2.32 range could trigger a new upward wave. For medium- to long-term investors, this correction might actually present a better entry opportunity. Short-term volatility does not alter the long-term trend, which is the true reflection of XRP’s current market situation.