XRP Today's News: Plunged before Bank of Japan decision, ETF inflows of 1 billion support a medium-term rebound

XRP continues to face intense selling pressure for the second consecutive day, testing the $1.8 support. The Bank of Japan’s rate hike expectations have sparked concerns over unwinding yen arbitrage trades, but the spot ETF has seen 23 consecutive days of net inflows totaling $1.03 billion. Analysts remain optimistic about a medium-term rebound to $2.5.

XRP Tests Critical Support for the Second Day, $1.8 at Risk

On December 18, XRP experienced its second day of heavy selling pressure, falling 2.97% to close at $1.8077, testing the critical support level at $1.8. The previous day, XRP had already declined 3.49%, with a two-day decline exceeding 6%, far surpassing the 1.04% drop in the broader crypto market.

Market concerns over the Bank of Japan’s rate hike continue to pressure XRP and the wider crypto market. Economists expect the BOJ to raise rates by 25 basis points to 0.75% on December 19 (Friday), marking a key step in the continuation of Japan’s monetary normalization.

This week, XRP has fallen back to $1.8, well below the 50-day and 200-day exponential moving averages (EMA), indicating a clear bearish technical outlook. Over a longer timeframe, since the launch of the Canary XRP ETF (XRPC) on November 14, XRP has declined 22%.

Analysts point out that delays in the market structure bill, the Fed’s hawkish rate path, and concerns over unwinding yen arbitrage trades have all contributed to negative market sentiment. However, these short-term factors may mask more significant structural changes: ongoing institutional inflows and improving regulatory environment.

Bank of Japan Rate Hike Expectations Spark Concerns Over Yen Arbitrage Trade Unwinding

The BOJ will announce its rate decision on December 19. While a 25 basis point hike is widely expected, the more critical aspect is the BOJ’s stance on neutral interest rates. Neutral rates refer to the interest rate level that is neither accommodative nor restrictive.

If the BOJ hints that the neutral rate range is between 1.5% and 2.0%, it would suggest multiple rate hikes through 2026. Importantly, repeated rate hikes by the BOJ and a more dovish stance from the Fed could significantly narrow the interest rate differential, potentially making yen arbitrage trades unprofitable.

Overnight, the US November inflation rate unexpectedly declined, boosting expectations for the Fed to cut rates in March. If the Fed adopts a more dovish rate path, the US-Japan interest rate gap will further narrow. Additionally, a strengthening yen would cause USD/JPY to fall, accelerating unwinding of yen arbitrage trades.

In such scenarios, traders will unwind leveraged positions in risk assets and repay yen loans, exerting direct downward pressure on cryptocurrencies like XRP.

Historical experience offers a warning. In July 2024, the BOJ raised rates and reduced Japanese government bond purchases, aligning with the Fed’s dovish stance. This monetary policy move triggered unwinding of yen arbitrage trades, causing USD/JPY to fall from around 161 in early July to below 140 in September.

As traders unwound risk asset positions, XRP’s price plummeted 34.5%, from $0.6591 on July 31, 2024, to $0.4320 on August 5, 2024. If the BOJ signals multiple rate hikes at this meeting, XRP risks falling to $1.5.

Spot XRP ETF Continues to Attract Over $1 Billion in Inflows, Institutional Outlook Remains Bullish

(Source: SoSoValue)

Despite short-term pressure from unwinding yen arbitrage trades, institutional investors seem unfazed, possibly considering longer-term prospects.

On December 17, spot XRP ETFs recorded $19 million in net inflows, following $8.54 million the previous day. Notably, the US XRP spot ETF market has seen 23 consecutive days of net inflows, with total inflows reaching $1.03 billion since launch. Data for December 18 (Thursday) will be released later this morning.

This sustained and robust capital inflow indicates that institutional investors remain confident in XRP’s long-term value and are not swayed by short-term price fluctuations. In contrast, retail investors tend to panic-sell during dips, while steady institutional inflows provide a price floor for XRP.

Strong demand for XRP spot ETFs and progress in crypto-friendly legislation lay a foundation for a bullish market in 2026. Analysts note that the inflow of funds into XRP spot ETFs buffers against downside risks from unwinding yen arbitrage trades, making a sharp crash like that of July-August 2024 less likely.

This divergence between institutional and retail behavior often serves as a leading indicator of market bottoms or reversals. When prices decline but institutional funds continue to flow in, it typically signals that professional investors see current levels as attractive and are building positions.

Market Structure Bill Nears Senate Vote

On December 18, White House AI and crypto affairs head David Sachs shared the latest developments on the market structure bill, stating:

“Today, we had a great call with Senator Tim Scott and Senator John Buzman, who confirmed that the review of the Clarity Act will take place in January. Thanks to their leadership, and support from House Republican Flench Hill and Rep. GT, we are closer than ever to passing the milestone crypto market structure bill called for by President Trump. We look forward to completing this work in January!”

XRP remains highly sensitive to US legislative developments, given its past impact from the SEC’s “enforcement and regulatory” strategies. With courts having ruled XRP is not a security, clear regulations will help eliminate future enforcement threats from the SEC.

Historical data supports that legislative progress positively impacts XRP’s price. On July 17, 2025, after the House passed the market structure bill and it was sent to the Senate, XRP’s price surged 14.69% in a single day. If the Senate passes the bill smoothly in January, XRP could see a similar price reaction.

A clear regulatory framework not only removes legal uncertainty but also provides institutional investors with a clearer compliance pathway, further boosting institutional inflows into the XRP ecosystem.

Technical Analysis and Key Levels: Short-term Bearish, Medium-term Bullish

(Source: Trading View)

From a technical perspective, XRP should focus on the following key levels:

Key Technical Levels

Support levels: $1.75, then $1.50

50-day EMA resistance: $2.1562

200-day EMA resistance: $2.4233

Psychological resistance: $2.0, $2.5, $3.0, and $3.66

On the daily chart, breaking below $1.75 support would expose the $1.50 support and reinforce a short-term bearish outlook. Conversely, breaking above the $2.0 psychological level would open the door to testing the 50-day EMA. Sustained breakout above the 50-day EMA would signal a reversal to a short-term bullish trend.

A bullish reversal would suggest that over the medium term (4-8 weeks), prices could rise toward the 200-day EMA and $2.5. Breaking through these moving averages would strengthen the medium-term outlook and target a long-term (8-12 weeks) price of $3.0.

Given current market dynamics, the short-term (1-4 weeks) outlook remains bearish, while the medium (4-8 weeks) and long-term (8-12 weeks) outlooks are bullish, with target prices of $2.5 and $3.0 respectively.

Strong demand for XRP spot ETFs and recent legislative developments in Congress support the bullish outlook for medium and long-term prices. In the short term, the Bank of Japan’s monetary policy decisions and neutral rate statements will remain key drivers. However, the impact of unwinding yen arbitrage trades may only last a few days rather than weeks, limiting its influence on the medium-term outlook.

Downside Risks and Key Variables for Bullish Scenario

Multiple factors could undermine the medium- to long-term bullish outlook. The BOJ raising rates and hinting that the neutral rate will be between 1.5% and 2%; MSCI removing digital asset reserve companies (DAT) from its index, potentially reducing market interest in XRP as a reserve asset; opposition from the US Senate against the market structure bill; and XRP spot ETF reporting outflows.

These factors could push XRP’s price down to $1.5, supporting a short-term bearish view. Nonetheless, strong demand for XRP spot ETFs, increasing adoption of XRP, and passage of crypto-friendly legislation support a long-term rise toward $3.0.

Looking ahead, the BOJ’s rate decisions, neutral rate outlook, and XRP ETF capital flows will influence near-term trends. If institutional investors react unfavorably to the BOJ’s stance, outflows from XRP spot ETFs could intensify, reinforcing the BOJ’s hawkish position.

In summary, hawkish rate hikes by the BOJ will support XRP short-term decline toward $1.75. Breaking below $1.75 would confirm the continuation of the short-term downtrend. However, strong demand for XRP spot ETFs and progress on the market structure bill underpin a medium-term rise to $2.5. If the Fed cuts rates in March and the Senate passes the bill, the long-term target could be set at $3.0.