Why Trader Demand for XRP Dropped and Could It Fall to $1?

Trader demand for XRP has declined sharply in recent months, reflected in falling volumes and open interest on major exchanges. This shift coincides with ongoing regulatory uncertainty stemming from the SEC’s lawsuit against Ripple Labs and broader macroeconomic headwinds affecting risk appetite across the crypto market. Understanding these dynamics is crucial as XRP’s price hovers near $1.20, raising questions about whether further declines toward $1 are likely or avoidable.

What happened

Over the course of late 2023 and into mid-2024, XRP has experienced a notable drop in trader interest. Trading volumes and open interest have fallen significantly on major cryptocurrency exchanges, indicating reduced speculative activity. Price data shows XRP declining from a peak near $1.75 in late 2023 to around $1.20 at the time of reporting.

A central driver of this decline is the unresolved lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against Ripple Labs. The SEC alleges that XRP qualifies as an unregistered security, a claim Ripple disputes. This legal uncertainty has introduced a cloud over XRP’s regulatory status, discouraging both retail and institutional investors from engaging with the token.

Institutional interest in XRP remains constrained, with no XRP-based exchange-traded funds (ETFs) approved by the SEC as of mid-2024. ETF issuers such as VanEck and WisdomTree have filed for XRP ETFs but face regulatory hurdles linked to the ongoing litigation. Without regulated investment vehicles, institutional inflows that could support XRP’s price and liquidity remain limited.

Beyond regulatory factors, broader macroeconomic conditions have also weighed on XRP demand. Rising interest rates and tightening monetary policy have dampened risk appetite across the cryptocurrency sector, affecting altcoins including XRP. Market commentary and analysis from sources such as Bloomberg indicate that these macroeconomic pressures contribute to negative sentiment, compounding the effects of regulatory uncertainty.

Market analysts and commentators interpret the current XRP price level near $1.20 as a tentative support point, though some technical analyses suggest the possibility of a further drop to $1 or below if negative catalysts persist. However, these price forecasts are not based on confirmed predictive models but rather on market speculation and technical signals.

Why this matters

The decline in trader demand for XRP exemplifies the challenges cryptocurrencies face amid regulatory ambiguity and shifting macroeconomic conditions. XRP’s unresolved legal status directly impacts its liquidity and market participation, particularly from institutional investors who typically prefer regulated products such as ETFs. This limits XRP’s integration into mainstream financial markets and reduces its attractiveness as an investment or trading asset.

The broader crypto market’s sensitivity to monetary policy and risk sentiment underscores that XRP’s price dynamics are influenced by factors beyond the SEC lawsuit alone. Reduced risk appetite in a tightening macroeconomic environment affects demand across altcoins, highlighting the interconnectedness of regulatory and economic drivers.

From a policy perspective, the ongoing SEC litigation against Ripple poses a precedent-setting case for how digital assets are classified and regulated in the United States. The outcome could influence not only XRP’s future but also regulatory frameworks for other cryptocurrencies, shaping market structure and investor confidence.

What remains unclear

Despite these confirmed developments, several key questions remain unanswered. The timing and potential outcome of the SEC vs. Ripple lawsuit are uncertain, leaving unclear how a final court ruling would affect trader demand or XRP’s price trajectory.

It is also not specified what concrete indicators would signal a reversal in XRP demand or confirm a further decline to $1. For example, whether volume spikes, regulatory statements, or ETF approvals would decisively change market sentiment remains unknown.

The relative weight of regulatory uncertainty versus macroeconomic factors in driving XRP’s decline has not been quantitatively established. Without detailed data, it is difficult to isolate the precise impact of each.

Furthermore, the role of Ripple’s ongoing business partnerships and product developments in influencing trader sentiment or price dynamics is not fully explained in the available reporting.

Finally, there is a lack of granular data on XRP trader demographics and sentiment, limiting insight into the behavioral drivers behind the demand drop.

What to watch next

• The progression and eventual resolution of the SEC lawsuit against Ripple Labs, which remains the primary regulatory overhang for XRP.
• Any SEC regulatory guidance or statements clarifying the classification of XRP or future enforcement intentions.
• Decisions by ETF issuers and the SEC regarding the approval or rejection of XRP-based ETFs, which could materially affect institutional participation.
• Market volume and open interest trends on major exchanges, serving as barometers for shifts in trader demand.
• Broader macroeconomic developments, including interest rate policy and risk sentiment, which influence appetite for cryptocurrencies broadly.

In summary, XRP’s decline in trader demand reflects a complex interplay of unresolved regulatory risk and challenging macroeconomic conditions. While the token’s price near $1.20 may act as a tentative floor, the absence of regulatory clarity and institutional investment vehicles keeps future price direction uncertain. Observers will need to monitor legal developments, regulatory signals, and market metrics closely to assess whether XRP stabilizes or faces further downside pressure.

Source: https://cointelegraph.com/news/3-reasons-why-trader-demand-for-xrp-evaporated-is-dollar1-next?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound. This article is based on verified research material available at the time of writing. Where information is limited or unavailable, this is stated explicitly.