XRP Price Surge Not Driven by Institutional Demand: Derivatives Data Reveals Short Position Closure

XRP's recent price surge has caught many by surprise, rising from a 12-month low to $1.47 in just six sessions. However, the rally was not fueled by institutional demand through ETFs, as some analysts initially suggested.

A closer look at the data reveals that US spot XRP funds took in roughly $13.24m of net new money during this period, while XRP's market capitalisation rose about $29.7bn over the same week. This means that institutional demand through ETFs accounted for only a tiny fraction of the move.

The real driver behind the price surge was likely the closure of short positions, with more than $3.3bn of shorts being closed out across three sessions in late August. This is evident from derivatives data and suggests that investors were betting against XRP's price recovery.

Ripple's continued spending on expansion and development efforts, despite the regulatory uncertainty surrounding its business model, also suggests that the company is confident in its prospects.