XRP Withdrawals Outnumber Deposits, Returns Fall to Four-Month Low

XRP (XRP) is seeing more withdrawals than deposits on crypto trading platforms, approaching the levels recorded in August. At the same time, its risk-adjusted returns on Binance have dropped to their lowest point in four months.

These two indicators emerge two days ahead of the Federal Reserve's rate decision on October 28. The Fed's forward guidance could determine which of the two signals traders follow.

XRP Withdrawals Crowd Out Deposits on Exchanges

The first indicator is based on exchange transaction volumes. Analyst Amr Taha said that withdrawals accounted for 55.75% of Binance's seven-day XRP deposit and withdrawal transactions as of October 25.

Across all centralized exchanges, the withdrawal proportion stood at 54.85%. Both figures are within one percentage point of the levels seen on August 18. Deposit shares dropped to 44.25% on Binance and 45.15% across all platforms.

However, this metric tallies transactions rather than XRP volume. A mix dominated by withdrawals indicates a greater number of transfers exiting exchanges, but not necessarily more tokens.

Binance also differs in the scale of these withdrawals. Its seven-day whale-versus-retail outflow spread was 49.5% on October 26, versus 29.7% across all exchanges. This 19.8-point difference was only 2.5 points on July 28.

Value data introduces a complication. Large holders have recently transferred $112.4 million in XRP to Binance, the largest amount in seven months, according to BeInCrypto. Large players thus seem to be active in both directions on Binance. The flows alone do not confirm that exchange supply is tightening.

Weak Returns Leave XRP Leaning on Fed Guidance

This uncertainty is significant because XRP's returns have fallen short of its volatility. Binance's XRP Sharpe-like ratio declined to approximately -0.2641, the lowest in four months, according to Arab Chain.

“The decline in Binance’s XRP Sharpe-like Ratio points to worsening risk-adjusted returns, suggesting that the returns generated during the measured period have become less attractive relative to the level of risk and volatility involved,” the analyst wrote.

XRP is trading at $1.29, a decline of 1.68% in the last 24 hours, according to BeInCrypto Markets. With returns already subdued, the token now confronts its next macroeconomic test on October 28.

The test stems from a Fed that is in a tightening cycle. The central bank raised its benchmark rate by 25 basis points in September, the first increase since July 2023.

Traders anticipate a pause this week followed by another move. CME FedWatch estimates a 90.6% probability of a hold at 3.75% to 4.00% on October 28. The same tool calculates a 79.7% chance of a rate hike in December.

Since a hold is largely discounted, the Fed's December guidance may be more important for XRP than the immediate decision. Clear indications of another hike could further dampen risk appetite. A more dovish tone could allow the withdrawal trend to influence the price.

Nevertheless, neither indicator predicts future direction. A four-month low in the Sharpe-like ratio does not imply that XRP must continue to decline. Transaction numbers also cannot verify that supply is exiting exchanges.