The XRP ecosystem is facing mounting pressure as key developments unfold across institutional holdings, regulatory battles, and investor sentiment. Once hailed as a top-tier digital asset with strong institutional backing, XRP is now navigating a turbulent phase marked by fund rebalancing, legal disputes, and declining confidence among major holders.
Grayscale Removes XRP from Digital Large Cap Fund
In a significant move signaling shifting institutional confidence, Grayscale Investments announced on January 5 that its Digital Large Cap Fund (DLC) has removed XRP from its portfolio and liquidated all holdings. This decision follows an audit report from December 31, which confirmed the exclusion of XRP due to ongoing market and regulatory uncertainties.
The DLC fund was designed to provide exposure to high-market-cap cryptocurrencies—targeting approximately 70% coverage of the top digital assets. Following the rebalancing, the fund now consists exclusively of four major cryptocurrencies:
- Bitcoin (BTC): 81.63%
- Ethereum (ETH): 15.86%
- Bitcoin Cash (BCH): 1.08%
- Litecoin (LTC): 1.43%
XRP previously held a 1.46% allocation in the fund, but with no other qualifying assets meeting the fund’s criteria, proceeds from the sale have been redistributed across these core holdings based on dynamic weighting.
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This action stems from Genesis Global Trading—authorized participant for Grayscale—halting XRP trading effective January 16, 2021 (Taiwan time) at 6:00 AM. As a result, the fund manager determined that continued inclusion of XRP was no longer feasible.
While Grayscale's standalone XRP Trust remains listed, all private placements across its six funds involving XRP are currently suspended. This reflects growing caution among financial intermediaries amid the unresolved U.S. Securities and Exchange Commission (SEC) lawsuit against Ripple Labs.
Blockchain.com Halts XRP Trading
Adding to the downward momentum, UK-based exchange Blockchain.com announced it would suspend XRP trading and deposits starting January 15 at 07:59 AM Taiwan time. Withdrawals remain unaffected, ensuring users can still access their holdings.
This decision aligns with broader industry trends, as several platforms reassess their exposure to XRP amid regulatory ambiguity. Alongside eToro, Blockchain.com joins a growing list of exchanges restricting XRP-related activities, highlighting increasing compliance concerns tied to potential classification of XRP as a security.
Such actions not only impact liquidity but also erode retail and institutional accessibility—a critical factor in maintaining long-term price stability and adoption.
C-Round Lead Investor Tetragon Sues Ripple
One of the most alarming developments comes from within Ripple’s own investor circle. Tetragon Financial Group, lead investor in Ripple’s $200 million Series C round in 2019—when the company was valued at $10 billion—has filed a lawsuit demanding stock redemption.
Backed by prominent institutions like SBI Holdings and Route 66 Ventures, the funding round was once seen as a vote of confidence in Ripple’s path toward an IPO. However, Tetragon now seeks enforcement of contractual clauses allowing redemption if XRP is deemed a security by U.S. regulators.
According to Bloomberg, Tetragon has requested temporary restraining orders, preliminary injunctions, and an expedited trial. The firm also aims to prevent Ripple from deploying cash or liquid assets before resolution—a move suggesting deepening financial strain and mistrust.
Ripple responded officially, stating:
“While our agreement allows for redemption under certain conditions if XRP is classified as a security, there has been no final determination. Tetragon’s claims are unfounded. We are disappointed they are exploiting the lack of regulatory clarity in the U.S., but we are confident the court will uphold our position.”
This legal escalation underscores the fragility of private investment agreements when public regulatory outcomes remain uncertain.
Whale Holdings Decline Amid Market Uncertainty
Market sentiment has further deteriorated as on-chain data reveals a notable exodus among large XRP holders. According to The Block’s latest analysis, the number of addresses holding over 1 million XRP has dropped by 8%, falling from 1,705 on December 22 to 1,562 by January 4.
This decline in whale participation signals waning confidence in XRP’s near-term prospects. Historically, such shifts precede extended periods of price stagnation or bearish pressure, especially when combined with institutional divestment and negative headlines.
Core factors influencing this trend include:
- Prolonged SEC litigation without resolution
- Reduced exchange availability
- Institutional de-risking strategies
- Contractual disputes with early investors
Together, these forces create a feedback loop that amplifies selling pressure and dampens market recovery potential.
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Frequently Asked Questions (FAQ)
Q: Why did Grayscale remove XRP from its Digital Large Cap Fund?
A: Grayscale removed XRP due to Genesis Global Trading suspending XRP trading services. Since the fund requires active trading access for rebalancing and valuation purposes, continued inclusion became impractical.
Q: Is XRP officially classified as a security?
A: As of now, there is no final legal determination. The SEC alleges that XRP is an unregistered security, but Ripple disputes this claim. A court ruling is expected in the ongoing case scheduled for February 22 in the Southern District of New York.
Q: Can I still trade or withdraw XRP on major exchanges?
A: While some platforms like Blockchain.com and eToro have paused trading and deposits, withdrawals are generally still supported. Other exchanges continue offering XRP pairs, though availability varies by region due to compliance policies.
Q: What impact does Tetragon’s lawsuit have on Ripple’s operations?
A: The lawsuit could strain Ripple’s liquidity if the court enforces stock redemption. More importantly, it damages investor confidence and highlights vulnerabilities in private financing structures amid regulatory uncertainty.
Q: Are large investors still supporting XRP?
A: On-chain data shows a clear decline in whale holdings—down 8% in less than two weeks. Combined with institutional exits and legal challenges, this indicates weakening support from major stakeholders.
Q: Could Grayscale relist XRP in the future?
A: Yes—if regulatory clarity emerges and trading resumes through authorized participants like Genesis, Grayscale may reconsider inclusion during future rebalancing cycles.
The Road Ahead for XRP
XRP stands at a pivotal crossroads. Once positioned as a bridge currency for global banking networks, its trajectory now hinges on legal outcomes rather than technological adoption alone.
Regulatory clarity from the SEC case will be decisive. A favorable ruling could restore exchange listings, reignite institutional interest, and stabilize whale holdings. Conversely, an adverse decision may trigger further delistings, redemptions, and long-term marginalization in major markets.
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For investors and observers alike, monitoring court developments, exchange policies, and on-chain behavior will be essential in assessing XRP’s resilience and future viability.
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