XRP Today's News: Yen arbitrage trading sparks a rebound, ETF attracts funds for 27 consecutive days

XRP has declined for five consecutive days, with a 35% plunge in Q4, marking the worst performance since 2022. Active accounts have dropped to 14,636. However, the US XRP ETF has experienced 27 consecutive days of inflows totaling $1.14 billion. Japan’s inflation rate has fallen to 2.0%, and a weakening yen has driven arbitrage trading inflows. Technically, $2.0 is a key breakout level, with a target of $2.5 to $3.0.

How does the Yen Carry Trade mechanism boost XRP?

On December 26, Japan’s weakening economic indicators became the core catalyst in XRP news today. Tokyo’s December annual inflation rate dropped from 2.7% in November to 2.0%, with core inflation also decreasing to 2.6% (from 2.8% in November). Influenced by this data, the USD/JPY rose 0.20% to 156.205. The yen’s weakness and the decline in 10-year Japanese government bond yields have driven yen carry trades, pushing up XRP prices.

The Yen Carry Trade is a key mechanism in the international financial markets. Investors borrow yen at low interest rates in Japan, convert to USD or other currencies, and invest in higher-yielding risk assets, including cryptocurrencies. When Japan’s inflation cools, markets expect the Bank of Japan to maintain an accommodative policy. Yen weakness reduces arbitrage costs, attracting more capital into risk assets.

After the data release, XRP’s price briefly fell to a low of $1.8244, then rebounded to an early high of $1.8792, supporting its short-term bullish outlook. Importantly, if the Bank of Japan adopts a more moderate interest rate path, concerns about unwinding yen carry trades may ease, strengthening the medium- to long-term bullish outlook. As the BOJ’s rate path becomes more moderate and market expectations of a Fed rate cut in March fade, arbitrage profits may continue.

This macro-financial logic is especially relevant in today’s XRP news. Compared to other major cryptocurrencies, XRP is more favored by institutional investors, who are the main participants in yen carry trades. Therefore, any change in Japanese policy could disproportionately impact XRP prices.

XRP ETF has attracted $1.14 billion over 27 days

(Source: SoSoValue)

Despite declining retail participation, institutional demand has continued to buffer downside pressure. The US XRP spot ETF saw a net inflow of $19.3 million on Wednesday, December 24, during a shortened trading day. This weekly inflow brings the total net inflow since launch to $1.14 billion, highlighting strong institutional interest.

Canary XRP ETF (XRPC) leads the market, with a total net inflow of $385.13 million since launch, benefiting from first-mover advantage. Meanwhile, Bitwise XRP ETF (XRP), Grayscale XRP ETF (GXRP), and Franklin XRP ETF (XRPZ) have also seen strong inflows, totaling $722.49 million since their launches.

Demand for US XRP spot ETFs contrasts sharply with the US Bitcoin spot ETF market, which experienced outflows for the fifth consecutive day on December 24. This divergence indicates that institutional investors are reallocating assets, rotating from Bitcoin into XRP. The strong demand for XRP spot ETFs supports a short- to medium-term bullish outlook.

While active accounts have decreased from 17,516 to 14,636, indicating retail exit, this cleansing may set the stage for future gains. When weaker holders exit at the bottom, market structure becomes more stable, and upon rebound, selling pressure diminishes significantly. The crypto Fear & Greed Index has fallen to 20, in the extreme fear zone, which is often viewed as a contrarian bullish indicator, suggesting the market may be undervalued.

$2.0 Critical Level Determines Three-Stage Targets

(Source: Trading View)

On the technical side, XRP fell 1.55% on December 25, closing at $1.8325. The decline was greater than the overall crypto market, which dropped 0.81%. The Thursday correction pushed XRP well below the 50-day and 200-day exponential moving averages (EMA), indicating a bearish trend. Despite the technical weakness, fundamentals are strengthening, with positive factors outweighing technical concerns.

XRP Price Path: Three-Stage Targets and Risks

Short-term (1-4 weeks) target $2.0: Break through the psychological level and stabilize above the 50-day EMA; otherwise, a dip to $1.75 support is possible.

Medium-term (4-8 weeks) target $2.5: Continue breaking above the 50-day EMA and test the 200-day EMA; ETF capital inflows need to persist.

Long-term (8-12 weeks) target $3.0: Requires Senate approval of the Market Structure Bill, a Fed rate cut in March, and other catalysts.

From the daily chart, breaking the $2.0 psychological barrier will activate the 50-day moving average at $2.0930. Sustained breakout above the 50-day EMA suggests a trend reversal for short-term upside, opening the door to test the 200-day EMA at $2.3880 and resistance at $2.5. Continued price movement above EMA lines will reinforce a positive medium-term outlook and target $3.0 in the longer term.

However, downside risks also exist. If the Bank of Japan announces a neutral interest rate range of 1.5% to 2.5%, implying a significant rate hike, yen carry trades could end; US economic data lowers expectations of a March rate cut; the Senate opposes the Market Structure Bill; or XRP spot ETF reports outflows, XRP could fall to $1.75, signaling a reversal to a bear market.