Ripple's performance in 2025 painted a complex picture, marked by significant volatility and the ongoing influence of its escrow release mechanism. Despite a challenging year that saw it close down 12%, key market indicators and underlying fundamentals suggest a resilient asset heading into 2026, prompting a closer look at its potential trajectory.
XRP's Volatile 2025 and Escrow Hurdles
After delivering solid gains in the first half of 2025, XRP faced a sharp correction in H2, with a 36% drop in Q4 erasing all prior advances and leaving the asset down 12% for the year. This turbulence highlighted the market's sensitivity to profit-taking cycles. As 2026 approaches, the routine $1 billion escrow release looms as a significant event. Historically, about 20% of this unlock hits the market, posing a critical test for XRP's price stability, especially given the crowded bullish positioning in derivatives.
Bullish Positioning Amidst Regulatory Clarity
Despite the price challenges, 2025 proved to be an inflection year for XRP due to increasing regulatory clarity with the SEC, providing a clear institutional tailwind. This positive sentiment is further bolstered by the potential CLARITY Act, which could support XRP's L1 infrastructure and broader adoption. On-chain data also reveals a compelling narrative: XRP's Exchange Reserves have steadily declined, dropping from 3 billion at the start of 2025 to 2.6 billion, with $300 million worth of XRP leaving exchanges in Q4 alone. This reduction in available supply on exchanges indicates underlying strength.
Building Resilience and a Potential Supply Squeeze
The combination of falling exchange reserves and four weeks of sideways trading around the $1.80 mark strongly suggests a supply squeeze is building under the surface. This technical resilience, paired with a 70%+ long skew in XRP/USDT perpetual contracts, indicates that traders are actively betting on upside potential, possibly frontrunning a local bottom. This robust positioning and the asset's underlying market strength present a compelling case for a bullish outlook, even as the escrow release tests its resilience.
