Why Selling XRP in a Downward Correction Is a Mistake for Long-Term Holders

The recent price action in XRP has sparked intense debate among investors, particularly as the token trades below the $2.00 psychological level amid bearish technical indicators. While short-term volatility and macroeconomic headwinds have amplified selling pressure, long-term holders would be wise to resist the urge to liquidate. A deeper analysis of XRP's market structure, institutional dynamics, and sentiment reveals that this correction represents a strategic inflection point rather than a terminal decline.

Market Structure: Liquidity Constraints and ETF-Driven Supply Lock-Up

XRP's price sensitivity during this correction is largely a function of its evolving market structure. According to a report by Captain Altcoin, XRP ETFs have absorbed a significant portion of circulating supply, reducing on-exchange liquidity and order book depth. This structural shift means smaller trades can now move the price more dramatically, creating an environment where thin liquidity at key support levels-such as the recent breakdown below $2.00-amplifies short-term volatility.

The absence of meaningful arbitrage between ETFs and spot markets has further destabilized price action. While ETF inflows have not yet stabilized spot prices, they have created a controlled environment where institutional buyers can accumulate without triggering the same speculative feedback loops seen in previous cycles. According to data from Captain Altcoin, for long-term holders, this means the current correction is less about fundamental weakness and more about a redistribution of supply to regulated, institutional-grade venues.

Institutional Dynamics: Accumulation and Strategic Entry Points

Despite the bearish narrative, institutional activity paints a more nuanced picture. Data from FXStreet indicates that XRP spot ETFs have attracted net assets of $1.16 billion as of late December 2025, with whale wallets (holding 10,000–100,000 XRP) increasing their share of total supply by 0.8% since early February. This accumulation contrasts sharply with the declining retail participation evident in XRP futures open interest, which has collapsed by over 95.7% since July.

The $2.00 level, once a psychological barrier, now serves as a strategic entry point for institutional investors. As noted by 247wallst, repeated attempts to breach this level have been met with immediate buying, suggesting a floor of demand controlled by large-scale participants. This behavior diverges from historical patterns where retail panic selling caused sharp breakdowns. For long-term holders, the presence of institutional buyers at this level implies a higher probability of a rebound than a sustained collapse.

Sentiment and Technical Indicators: Bearish Momentum vs. Oversold Conditions

While technical indicators like the RSI and MACD remain bearish, they have not yet reached extreme oversold territory. The RSI hovering near 37 suggests moderate bearish momentum but leaves room for a reversal if buyers step in. Analysts at CCN have highlighted that a close below $1.90 could trigger a 60% decline to $0.80, but this scenario assumes a continuation of current selling pressure without accounting for the stabilizing influence of ETF inflows and whale accumulation.

Historical context also favors patience. A report by 247wallst notes that XRP has historically rebounded significantly after extended periods under $2.50, including a nearly 850% rally following a 50-week SMA breakout in 2024. The resolution of the Ripple SEC case in August 2025 and ongoing enterprise integrations further strengthen XRP's fundamentals, providing a long-term catalyst that transcends short-term price action.

Conclusion: Strategic Patience in a Transitional Phase

Selling XRP during this correction would be a strategic misstep for long-term holders. The interplay of structural liquidity constraints, institutional accumulation, and controlled buying at key levels suggests the market is in a transitional phase. While the immediate technical outlook remains bearish, the absence of extreme oversold conditions and the presence of institutional buyers at critical support levels indicate a higher likelihood of a rebound than a terminal decline.

For investors with a multi-year horizon, the current price represents an opportunity to consolidate positions in a token with strong institutional backing and regulatory clarity. History has shown that XRP's volatility is often a prelude to explosive recoveries, and the structural changes in its market dynamics-driven by ETF adoption and whale activity-position it for a more stable, long-term trajectory.