XRP has been among the stronger-performing altcoins this week, gaining more than 3% as the broader crypto market returned to a risk-on tone.

The move has also coincided with improving decentralized finance activity on the XRP Ledger (XRPL), where stablecoin supply is moving closer to the $1 billion mark. Ripple launched its own RLUSD stablecoin in late 2024, and the growing supply on XRPL signals that institutional and DeFi use of the ledger is expanding beyond pure payments and remittance corridors. On the price chart, XRP has reclaimed the $1.15 level, its first meaningful bullish breakout since early May.

The move above $1.15 also aligns with recent on-chain wallet activity. According to Santiment, whales and sharks holding between 100,000 and 100 million XRP have increased their balances by 2.8% over the past five weeks. That suggests larger holders have continued to accumulate while XRP's price has begun to respond.

The opposite pattern has appeared among the smallest wallets. Wallets holding less than 0.01 XRP have reduced their balances by 5.2% over the same period. Historically, Ripple [XRP] has more often tracked the behavior of its largest holders rather than its smallest retail wallets, making the divergence a supportive factor for the current move.

However, the reduction in very small wallet balances may also point to risks that whale accumulation alone cannot fully offset. If the gap between large-holder buying and smaller-wallet selling begins to narrow, the current bullish setup could weaken more quickly.

XRP's next move involves more than whale accumulation

XRP exchange-traded funds began the week with positive activity. Bitwise's spot XRP ETF recorded $2.49 million in net inflows on Monday, July 20, while other issuers were flat, according to SoSoValue. Spot XRP ETFs began trading earlier in 2025 following the resolution of the SEC's long-running case against Ripple, which had previously been the primary overhang on institutional adoption.

Even so, one day of inflows does not change the broader trend. Spot XRP ETF demand has cooled over the past several weeks, with inflows still far below the levels recorded in April and May 2026. That indicates institutional participation has not kept pace with XRP's latest price breakout.

Spot-market activity has also weakened. Upbit's weekly XRP trading volume has dropped 51%, falling from 530 million XRP to 258 million XRP. Binance spot flows have declined by nearly 99%, pointing to reduced spot participation.

At the same time, derivatives traders have become more active. Binance XRP open interest has risen 5.9% to $423.8 million, pushing leverage ratios to recent highs. When open interest climbs alongside falling spot volume, it typically signals that traders are building positions through borrowed capital rather than committing fresh capital — a dynamic that can amplify both upside and downside moves. As a result, a larger share of XRP's recent rally appears to be linked to leveraged positioning rather than fresh spot buying.

In that context, the decline in retail balances may not be incidental. It could reflect fading spot interest and suggest that XRP's move is more of a short-term rotation than the beginning of a broader structural trend. That places the recent increase in leverage under closer scrutiny.

If spot demand continues to cool while leverage keeps rising, XRP's breakout could face difficulty holding its current level. Under those conditions, the rally would be vulnerable to becoming a bull trap. Key indicators to monitor in the coming sessions include whether ETF inflows broaden beyond a single issuer, whether XRPL stablecoin supply continues its climb toward $1 billion, and whether the whale accumulation trend sustains even as retail balances contract.

Whale buying and a strong technical breakout are currently supporting XRP's rally, but weaker ETF demand and higher leverage remain key risks for the sustainability of the move.