XRP at $1.80: A Divergence-Driven Buying Opportunity Amid Shrinking Exchange Supply

The XRP price has tested critical support levels near $1.80 in Q4 2025, sparking debate among investors about whether this represents a capitulation point or a strategic entry opportunity. While the broader technical structure remains bearish, on-chain data reveals a compelling divergence between shrinking exchange reserves and deteriorating price action. This article explores how tightening liquidity, ETF-driven accumulation, and weakening bearish momentum create a unique inflection point for XRP, warranting a contrarian reassessment of its near-term potential.

On-Chain Divergence: Shrinking Exchange Supply and ETF-Driven Absorption

Exchange reserves for XRP have collapsed to multi-year lows, with total balances dropping from 3.76 billion tokens in October 2025 to just 1.6 billion by December, a 57% drawdown according to data. Binance, the largest exchange, saw its XRP holdings fall to 2.66 billion tokens-a six-month low-indicating reduced sell-side pressure according to analysts. This contraction in liquid supply aligns with historical patterns where tightening liquidity precedes price rebounds, as fewer tokens are available for immediate dumping as research shows.

A key driver of this outflow is institutional demand. U.S. spot ETFs, including the Canary XRP ETF (XRPC), have absorbed approximately 750 million XRP since their launch, directly reducing circulating supply. This ETF-driven absorption, combined with large holders moving tokens to long-term storage, suggests a structural shift in market dynamics. As one analyst notes, "The shrinking exchange supply is a supply shock in the making, which could amplify price sensitivity in 2026".

Technical Divergence: Bearish Structure vs. Oversold Momentum

Despite the bearish on-chain narrative, technical indicators reveal a nuanced picture. XRP's price has formed a "death cross" as the 50-day moving average falls below the 200-day average, signaling short-term weakness. The RSI, however, has dipped into oversold territory (33.71), creating a bullish divergence where the indicator forms higher lows while the price tests lower levels. This divergence often precedes short-term reversals, as seen in prior cycles where oversold conditions led to 20-50% rebounds according to historical patterns.

The MACD histogram, while still negative, shows early stabilization on the D1 timeframe, with a value of +0.01 as of late December 2025. This suggests weakening bearish momentum, particularly if the price holds above $1.85-a critical support level. A successful retest of this level could trigger a bounce toward $2.28, aligning with Bollinger Bands and prior support-turned-resistance zones.

Contrarian Case: Supply Shock vs. Macro Headwinds

The divergence between on-chain strength and technical weakness creates a contrarian opportunity. While macroeconomic headwinds and Bitcoin's underperformance weigh on XRP, the shrinking exchange supply and ETF inflows are creating a "supply shock" that could amplify price reactions. For instance, active XRP addresses hit a three-month high in Q4 2025 according to market data, indicating renewed engagement from both retail and institutional participants.

However, risks remain. A breakdown below $1.82 could trigger further declines toward $1.60, as the RSI and MACD would likely confirm deteriorating momentum. Conversely, a sustained rebound above $1.92-where the 20-day EMA resides-could validate bullish momentum and push the price toward $2.00.

Strategic Implications for Investors

At $1.80, XRP sits at a critical juncture. The shrinking exchange supply and ETF-driven absorption suggest a potential stabilization or relief rally, particularly if institutional demand continues to outpace selling pressure. However, the technical structure remains fragile, with key support levels needing confirmation to avoid further downside.

Investors should monitor two key signals:
1. RSI and Stochastic Confirmation: A move above 40 in RSI and a bullish crossover in the Stochastic oscillator would strengthen the case for a near-term rebound.
2. Exchange Outflows: Persistent outflows from Binance and other platforms would reinforce the narrative of reduced liquidity and increased conviction among holders according to analysts.

While the broader market remains bearish, the interplay of on-chain strength and technical divergence positions XRP as a high-conviction trade for those willing to navigate short-term volatility. As one analyst concludes, "The market is pricing in a continuation of weakness, but the on-chain data tells a different story-one where supply constraints and institutional demand could drive a surprise breakout"