Binance's Dominance in XRP Custody: Implications for Liquidity and Price Stability

In September 2025, Binance has emerged as the largest custodian of XRP, holding over 2.788 billion tokens in custody for its users—valued at approximately $5.96 billion at $2.98 per XRP Binance Reports Major Shift in XRP, BTC, ETH Proof of Reserves^[3]. This dominance underscores a critical shift in the XRP ecosystem, where centralized exchanges now wield outsized influence over liquidity and price dynamics. With Binance controlling nearly 5% of the total XRP supply (100 billion tokens) Binance Surpasses Uphold to Become Largest XRP Custodian^[1], the implications for market concentration and centralized control demand closer scrutiny.

Market Concentration: Binance's XRP Custody and Liquidity Metrics

Binance's custodial holdings have directly shaped XRP's liquidity profile. The exchange's pooled XRP—managed across hot wallets, cold storage, and settlement addresses—enables efficient execution of large trades, with order book depths exceeding $100 million at competitive price levels Tight price parity hides structural gaps in XRP liquidity on exchanges^[5]. For instance, 24-hour buy volumes on Binance's XRP-USDT pair have reached 3.7 million XRP (35% of the order book), while sell volumes hit 6.7 million XRP (65%) Binance Surpasses Uphold to Become Largest XRP Custodian^[1]. This liquidity concentration, however, raises concerns. Academic analyses suggest that custodial dominance can distort market microstructure, as exchanges with large holdings may manipulate order book visibility or timing to influence trade outcomes Billions in XRP Are Disappearing from Exchanges^[4].

The structural gaps in XRP liquidity are further evident when comparing U.S. and offshore exchanges. While Binance dominates USDT-quoted XRP trading, Coinbase holds sway over USD-quoted pairs. Despite this segmentation, arbitrage mechanisms keep price discrepancies below four basis points Tight price parity hides structural gaps in XRP liquidity on exchanges^[5]. Yet, the reliance on centralized custodians like Binance introduces fragility: sudden withdrawals or sell-offs from its reserves could trigger slippage or volatility, as seen in August 2025 when 900 million XRP moved to cold wallets Binance Surpasses Uphold to Become Largest XRP Custodian^[1].

Price Stability and Manipulation Risks

Binance's custodial control has sparked allegations of price suppression. Analyst Pumpius argues that the exchange systematically depresses XRP prices during positive news cycles—such as Ripple's new payment corridors—to protect its liquidity business model Binance Surpasses Uphold to Become Largest XRP Custodian^[1]. This strategy, if true, exploits XRP's utility as a cross-border payment tool, which could disrupt Binance's existing infrastructure. Meanwhile, Ripple Labs' escrow of 36 billion XRP (42% of total supply) Binance Reports Major Shift in XRP, BTC, ETH Proof of Reserves^[3] adds another layer of complexity. By releasing tokens in controlled increments, Ripple stabilizes supply but also centralizes control, contradicting XRP's decentralized ethos.

Price volatility remains a persistent risk. XRP's 30-day volatility index, at 40% higher than top-tier cryptos like Bitcoin, reflects its sensitivity to custodial movements and regulatory uncertainty Tight price parity hides structural gaps in XRP liquidity on exchanges^[5]. For example, the SEC's ongoing legal battles with Ripple have created a regulatory overhang, while Binance's recent stablecoin inflows (1.65 billion USD) highlight how liquidity can be weaponized during volatile periods Billions in XRP Are Disappearing from Exchanges^[4].

Centralized Control vs. Decentralization

The concentration of XRP custody in centralized hands challenges the asset's decentralization narrative. While Binance's role enhances short-term liquidity, it also creates systemic risks. If a single entity controls 5% of the total supply, it can influence price discovery, suppress competition, or even facilitate market manipulation Binance Surpasses Uphold to Become Largest XRP Custodian^[1]. This dynamic is exacerbated by the disappearance of billions in XRP from exchanges into cold wallets and OTC desks, thinning available liquidity and amplifying volatility Billions in XRP Are Disappearing from Exchanges^[4].

Academic research on crypto-asset markets warns that such concentration increases interconnectedness with traditional finance, heightening risks for institutional investors Decrypting financial stability risks in crypto-asset markets^[6]. For XRP, this means its adoption in ETFs or institutional portfolios could backfire if custodial risks remain unaddressed.

Conclusion: Balancing Liquidity and Risk

Binance's dominance in XRP custody has undeniably bolstered the token's liquidity, enabling robust trading volumes and efficient order execution. However, the centralization of custody and the potential for manipulation pose long-term threats to XRP's stability and decentralization. Investors must weigh these risks against the benefits of liquidity, while regulators and market participants should advocate for transparency mechanisms—such as proof-of-reserves—to mitigate centralized control.

As XRP navigates its path toward mainstream adoption, the tension between liquidity and decentralization will remain a defining challenge. The coming months will test whether the XRP ecosystem can evolve without sacrificing its foundational principles.