The Major Bankruptcy Crisis: Why XRP Became the Weak Point of the Market

Warning Signs from Organizational Capital Flows

2024 has witnessed one of the most severe liquidity tests since the ecosystem collapse in 2022. Over $1 trillion worth of digital assets has been wiped out in recent weeks, causing a market-wide shock. Although Bitcoin remains at the center of this volatility, the impact has structurally spread to large-cap assets like XRP and Ethereum.

The event was not merely a typical price correction. Instead, it reflects a sharp reversal in institutional capital flows. According to data from Coinperps, Bitcoin ETF products currently based in the US experienced approximately $903 million in withdrawals on November 20th — the largest figure for that month. This marks one of the biggest capital outflows since these investment tools launched in early 2024.

The total ETF withdrawals for November have reached $3.79 billion, surpassing the previous record set in February. As a result, Bitcoin investment funds have decreased by $3.98 billion from their all-time high in total assets under management — the second-largest decline in the short history of these instruments.

Selling Pressure from New Entrants

When funds are forced to liquidate underlying assets to meet withdrawal demands, they create additional selling pressure on the spot market. This liquidity drain coincides with panic selling behavior from a specific group: new investors entering the market.

Data from CheckOnChain shows traders realized losses of $1 billion on November 21st alone — one of the largest realized loss days of the year. Most of this selling pressure originated from holders of coins under 3 months old.

This group reacts most quickly to price volatility — they often buy near local peaks, and when prices reverse, they are the first to exit. Data from Glassnode confirms this, showing the 30-day moving average of XRP Realized Losses has spiked to $75 million daily — a level last seen at market lows in 2022.

A notable difference is that the current downturn is not driven by credit contagion or exchange bankruptcies like in 2022. Instead, it is fueled by a depletion of marginal (margin demand) and mechanical deleveraging. This indicates there are no significant “whale” interactions — data from CryptoQuant shows large whale activity is nearly absent from the market.

XRP: The Casualty of Systemic Crisis

While Bitcoin faces direct pressure from capital withdrawals, XRP emerges as a clear indicator of cascading (spread) secondary effects from the liquidity crisis.

As Bitcoin drops near $80,000, XRP declined nearly 9% in 24 hours and fell below $2 for the first time since April. According to actual data from January 12, 2026, XRP trades around $2.07, down 1.52% in the past 24 hours, with a circulating market cap of $125.83 billion. This decline is not surprising as liquidity flowing out of Bitcoin sectors is leaving the entire crypto ecosystem rather than shifting into altcoins.

The clearest manifestation of this pressure is the realized loss level in XRP. According to Glassnode, the 30-day exponential moving average of XRP Realized Losses has surged to $75 million per day — a level last recorded in April 2025. This figure not only reflects price declines but also indicates that capitulation has spread from Bitcoin holders deep into the altcoin community.

###Profit Loss Profile Collapse

This large-scale sell-off has severely impacted XRP’s entire network profit profile. Currently, only 58.5% of the circulating XRP supply is in profit — the weakest since November 2024 when the token traded near $0.53.

This means approximately 41.5% of the total supply — around 26.5 billion tokens — is held by investors in a loss position. This high percentage of loss-making holders creates a strong resistance layer for any potential price recovery. When prices attempt to rebound, loss-holders tend to exit at break-even levels, creating a persistent selling pressure that limits upward momentum.

It is noteworthy that this downturn is occurring despite community enthusiasm around newly launched XRP ETF products. This fact demonstrates that macro-level liquidity constraints and Bitcoin market pressures are entirely overshadowing any bullish narratives specific to this asset.

Structural Factors Deepening the Damage

Why is XRP more heavily impacted than Bitcoin despite not being the origin of the crisis? The answer lies in fundamental structural differences in the markets.

First, Bitcoin benefits from deep on-chain liquidity from institutional investors, along with significant ETF capital flows that support prices during volatility. XRP lacks these factors. Its order book is often much thinner, causing large sell-offs to cause significant disruptions to price stability.

Furthermore, XRP’s investor base is more dispersed and predominantly retail rather than institutional. These investors tend to react faster to price swings and are more prone to panic during broad market corrections.

These structural limitations are reflected in technical indicators. XRP recently formed a “death cross” — its price fell below both the 50-day and 200-day moving averages. This technical pattern is widely regarded as a sign of exhausted momentum and often signals prolonged selling pressure. It serves as confirmation for algorithmic traders to re-position at lower levels.

However, the main driver remains larger market forces. When Bitcoin undergoes liquidity events driven by ETF capital withdrawals combined with short-term investor capitulation, altcoins do not act as shock absorbers but instead amplify volatility. Liquidity does not shift from Bitcoin to altcoins; rather, it exits the entire crypto ecosystem, moving into fiat or stablecoins.

Negative Feedback Loop

The current market structure is characterized by a negative feedback loop:

1. Bitcoin price declines trigger larger ETF withdrawal demands
2. These demands force fund issuers to sell in the spot market, driving prices down further
3. Lower prices panic short-term investors, who sell in a liquidity-starved market
4. As overall market liquidity diminishes, altcoins like XRP suffer larger losses due to thinner order books
5. Negative sentiment triggers additional ETF withdrawals

This self-reinforcing cycle explains why XRP’s losses continue to grow even without specific negative news about the asset. The driving factors are systemic rather than isolated.

Signals to Watch

To determine whether the market has bottomed, attention should be paid to XRP’s profit supply ratio. If the proportion of supply in profit remains stable or increases at current levels, it could signal that most weak-handed investors have been shaken out. Conversely, if losses continue to rise, it indicates that the liquidity crisis has yet to find a floor.

Bitcoin is currently trading around $90,780, down 0.32% in 24 hours, with a market cap of $1.81336 trillion. Bitcoin’s stability will depend on its ability to absorb selling pressure from ETFs and rebuild short-term investor confidence.

Until this negative feedback loop is broken by easing withdrawal flows or a return of spot demand, assets with weaker liquidity profiles like XRP will continue to face downside risks. On-chain data will ultimately judge the depth of this crisis.