XRP supply squeeze may build despite $1B monthly escrow release
XRP faces a scheduled $1 billion monthly escrow release in early 2026, but on-chain and derivatives data point to improving fundamentals that could limit immediate sell pressure. Exchange reserves fell from roughly 3 billion XRP at the start of 2025 to about 2.6 billion by year-end, with approximately $300 million worth withdrawn from exchanges in Q4 — a sign of accumulation and reduced liquidity on exchanges. Derivatives (CoinGlass) show XRP/USDT perpetuals carrying a >70% long skew while price has consolidated near $1.80–$1.85 for several weeks. Historically, Ripple’s escrow mechanism returns about 80% of unlocked coins to new escrows and an estimated ~20% typically reaches the market, so a full $1B unlock often has limited immediate impact. Combining declining exchange reserves, strong long skew, and sideways price action, analysts argue the escrow release could be a non-event or even precede upside if demand holds — effectively creating a supply squeeze under the surface. Traders should monitor exchange reserve flows, perpetuals skew, and price reaction around $1.80–$1.85 to gauge whether longs are positioning for a local bottom or face squeeze risk. Longer-term direction will depend on continued reserve trends, sustained demand, and broader market and regulatory developments.
Bullish
The combined evidence points to a net bullish effect for XRP price. Key drivers: 1) Falling exchange reserves (from ~3B to ~2.6B XRP) indicate accumulation and reduced immediate sell-side liquidity, which raises the likelihood that unlocked coins won’t flood markets. 2) Historical pattern of Ripple escrows — roughly 80% returned to new escrows and only ~20% typically reaching markets — reduces the effective supply shock from a $1B release. 3) A persistent >70% long skew in XRP/USDT perpetuals signals trader positioning biased to upside; if leveraged longs remain and liquidity is thin, sideways price action near $1.80–$1.85 can allow a supply squeeze to develop. Short-term implications: higher gamma and squeeze risk — traders should watch exchange reserve flows, funding rates, and price reaction post-release; leveraged short positions could be vulnerable. Long-term implications: sustained reserve declines and continuing demand (from on-chain flows or macro/regulatory tailwinds) would support a continued bullish trend, while a reversal in reserves or broader market sell-offs would negate this view. Overall, the escrow event is more likely a non-event or bullish catalyst than a pure supply-driven bearish shock given current on-chain and derivatives signals.