XRP exchange reserves jump higher, but is the threat of a sell-off real?

Key Takeaways

Usually, a surge in exchange reserves is a worrisome outcome for holders of that asset. However, in this instance, the Coin Days Destroyed and whale transaction metrics revealed that XRP investors need not anticipate long-term bearishness.

On 01 September, XRP reserves on exchanges climbed suddenly and simultaneously across multiple exchanges. Binance saw a 610 million token hike, while Bithumb recorded an 872 million XRP increase.

For its part, Bybit reserves nearly doubled from 188 million to 380 million, and OKEx reserves hit 233 million XRP.

Source: CryptoQuant

Generally, a surge in exchange reserves is a sign that the market is positioning itself to sell. However, this was not the typical token movement that precedes rapid price drops, as evidenced by the whale to exchange transactions and Coin Days Destroyed. On 01 September, XRP shed 0.61% of its value, but still saw heightened volatility.

What should XRP traders and investors expect next?

No sign of panicking from XRP holders despite reserves surge

Source: CryptoQuant

The spot taker CVD measures the cumulative difference between market buy and market sell volumes over 3 months. Since 31 July, the metric has reflected a taker sell-dominant phase.

The prevalence of selling pressure over the past two months is a worrisome fact for investors. Over the past few weeks, XRP has traded within a descending triangle pattern. However, it noted a bullish breakout on Sunday, 07 September.

Source: XRP/USDT on TradingView

And yet, as the 1-day chart highlighted, the market structure was bearish despite the breakout past the triangle pattern. The OBV has not made a notable high yet, although it has slowly moved higher in September.

The MACD also saw a bullish crossover below the zero line – A sign that bearish momentum may be weakening in recent days. Overall, it appeared likely that XRP would continue to trend south unless the buying pressure increases considerably. This would be reflected in the OBV.

Source: CryptoQuant

The whale to exchange transactions on Binance hardly stirred on 01 September, even though exchange reserves increased by 610 million XRP. If the hike in reserves came from whales, the metric above would have reflected it on the day.

Source: Glassnode

Similarly, the Coin Days Destroyed were also relatively flat.

Therefore, it seemed likely that the exchange reserves jumped, not as a result of panicked investors selling, but exchanges buying more XRP. In fact, this could be a sign of institutional coordination for an upcoming event.