XRP’s Institutional Crossroads: ETF Momentum vs. Direct Sales Exodus

As of February 2026, XRP stands at a pivotal institutional juncture, marked by conflicting signals between imminent ETF approvals and persistent regulatory headwinds for direct sales. Six months following the SEC's settlement with Ripple, the market is witnessing a paradox: while the probability of spot XRP ETF approvals in the U.S. has surged to an estimated 95%, driven by filings from major asset managers like Bitwise and WisdomTree, on-chain data simultaneously reveals a net outflow of $405,000 from institutional wallets within a single 24-hour period. This divergence highlights the lingering impact of the August 2023 court ruling, which continues to cast a shadow by classifying direct institutional sales of XRP as securities transactions. This creates a state of regulatory whiplash, where the broader 'legal clarity' achieved from the settlement is being counteracted by specific compliance uncertainties for institutions engaging in direct purchases. The growing ETF demand signals a strong vote of confidence from traditional finance in XRP's long-term viability and its integration into regulated investment vehicles. However, the exodus from direct holdings suggests that institutions remain cautious about navigating the unresolved nuances of securities law, preferring the insulated, regulated pathway an ETF provides. This dynamic sets the stage for a potential structural shift in how institutional capital accesses XRP, moving away from direct custody and towards derivative and fund-based products. The coming months will be critical in determining whether ETF inflows can decisively outweigh the outflows from direct sales, ultimately shaping XRP's price discovery mechanism and its adoption trajectory within the global financial system.

XRP’s Institutional Paradox: ETF Demand Grows Amid Direct Sales Exodus

Six months after the SEC settled its case against Ripple, XRP faces a institutional conundrum. While ETF approvals appear imminent—with Bitwise and WisdomTree filings pushing odds to 95%—on-chain data reveals a $405,000 net outflow from institutional wallets in 24 hours. The August 2023 ruling's lingering shadow classifies direct institutional sales as securities, creating regulatory whiplash despite broader 'legal clarity'.

Grayscale's GXRP conversion filing signals accelerating ETF preparations, yet banks remain paralyzed by Judge Torres' precise wording. 'Project Crypto', the SEC's new onchain initiative, has deprioritized enforcement but failed to resolve this critical ambiguity. XRP trades at a steep discount to its $3.65 peak as the market digests these conflicting signals.

XRP Ledger Activity Surges to Yearly Highs Amid Market Volatility

The XRP Ledger is experiencing accelerated transaction velocity, reaching 0.013 – matching 2025 peaks – as on-chain activity defies broader market downturns. Network usage metrics suggest growing demand for block space, with transactional throughput now at record levels despite XRP's price hovering at $1.57.

Analyst Xaif Crypto notes the velocity rebound signals renewed economic utility, whether through payments, DeFi, or speculative trading. The metric's rise after months of stagnation indicates capital rotation into active circulation rather than stagnant holdings, a bullish divergence from price action.

This throughput surge mirrors 2021's bull market patterns, where ledger activity preceded major rallies. The data implies institutional actors may be stress-testing the network for enterprise use cases, particularly in cross-border settlements.

Ripple’s Permissioned Domains Pave Way for Institutional Liquidity on XRP Ledger

Crypto analyst Stern Drew identifies permissioned domains as the final component needed for institutional capital deployment on the XRP Ledger. The feature, highlighted by former Ripple CTO David Schwartz, addresses historical institutional reluctance toward on-chain transactions by providing secure, regulated access points.

Regulatory clarity following Ripple's SEC lawsuit has cleared the path for implementation. Schwartz previously noted even Ripple avoided using XRPL's DEX due to concerns about unvetted liquidity providers—a gap permissioned domains now fill through zk-Credential verification systems.

Flare Network Launches Modular Lending for XRP, Enabling Yield Generation

Flare Network has introduced modular lending for XRP through an integration with Morpho and Mystic Finance, marking a significant expansion of on-chain utility for the digital asset. This development allows FXRP holders—Flare's XRP-pegged asset—to participate in yield-bearing vaults and borrow against their positions without selling.

The integration leverages Morpho's lending infrastructure, which boasts over $10 billion in deposits across ethereum Virtual Machine (EVM) chains. Mystic Finance serves as the user interface, enabling seamless interaction with these permissionless lending markets. This represents the first implementation of modular lending on Flare specifically tailored for XRP holders.

The move signals growing DeFi sophistication for XRP, which has historically lagged behind Ethereum and other smart contract platforms in yield-generation opportunities. By combining Flare's interoperability features with Morpho's lending protocols, the network creates new capital efficiency avenues for one of crypto's most widely held assets.