XRP reserves on centralized exchanges plummeted in 2025 from 4 billion to 1.6–1.7 billion tokens by December, sparking speculation of a 2026 supply shock. Despite this, analysts warn of limited immediate price impact or sustained rallies. Glassnode data revealed a drastic fall in XRP exchange holdings, prompting discussions on potential scarcity.

The decrease in XRP exchange balances coincided with Ripple releasing 1 billion XRP from escrow on January 1, 2026. Historical trends show that drops in exchange reserves do not always lead to price surges. Reduced exchange supply may alleviate short-term selling pressure rather than generate new demand.

The supply shock theory has been questioned due to incomplete data. Glassnode tracks only ten exchanges, while expanded coverage by analyst Leonidas revealed around 14 billion XRP held across platforms in late 2025. This highlights the challenge of relying on limited exchange data to predict market behavior accurately.

Ripple’s monthly escrow release of 1 billion XRP on January 1, 2026, was largely viewed as a non-event by the market, with only a fraction entering circulation. Factors like XRP ETF inflows, institutional adoption, and regulatory developments may have a more significant impact on XRP demand than fluctuations in exchange reserves.

Despite XRP reserves hitting an 8-year low, the dynamic nature of the overall supply suggests that a potential 2026 supply shock is not guaranteed. Factors beyond exchange reserves, such as regulatory developments and institutional adoption, may play a more significant role in influencing XRP demand.

Read more at Yahoo Finance: Supply Shock Narrative Faces Doubt As XRP Exchange Reserves Hit 8-Year Lows