Despite 71% being profitable, XRP has just activated an uncommon signal not seen since 2022, which may hinder rallies for an extended period.

XRP's on-chain framework now resembles a delicate situation from the beginning of 2022, when short-term accumulation below longer-term cost bases laid the groundwork for extended sideways movement.

Glassnode highlighted this trend on Jan. 19: investors engaging over the 1-week to 1-month timeframe are purchasing below the realized price of the 6- to 12-month group.

This inversion among age bands indicates that newer buyers have a more favorable average entry point compared to earlier “top buyers,” and as this arrangement continues, the psychological strain on underwater holders escalates.

XRP's 6-12 month group (yellow line) maintains cost bases above the current market price, creating overhead resistance as newer buyers accumulate at lower levels.

Each advance toward their breakeven point serves as a potential exit strategy, transforming relief into resistance.

The issue is not whether pressure is present; it certainly is. The question is whether this pressure is resulting in actual distribution and whether leverage is positioned to amplify the forthcoming movement.

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Supply in profit remains near healthy levels, but cohort stress persists

Santiment data reveals that 71.5% of the XRP supply was in profit as of Jan. 19, with the token trading at $2.01. This positions the market within a range typically linked with healthier bullish structures, where the majority of holders are comfortably above water.

However, the overall figure conceals the structural tension identified by Glassnode: the six-to-12-month group maintains cost bases significantly higher than where recent participants are accumulating.

XRP realized profit/loss surged sharply in early January while the percentage of supply in profit fell from previous highs.

Markets do not move solely through aggregate averages. Instead, they operate through clustered layers of supply at distinct cost bases. When short-term buyers accumulate from stressed longer-term holders, rallies encounter new selling pressure from groups looking to mitigate risk or exit positions that have tested their conviction for months.

The cohort inversion holds greater significance when the overall market is already tilted toward profits. With over 70% of supply in the green, rallies are more likely to face profit-taking layered on top of breakeven selling from top buyers.

This dual pressure can limit momentum before it has a chance to build.

Realized profit and loss patterns indicate distribution into rallies

If top buyers are faltering, it manifests as realized losses during downturns and realized profits in relief rallies. Santiment data tracks this trend: XRP realized profit and loss jumped from 5.15 million on Jan. 12 to 104.2 million on Jan. 14, before cooling to 1.42 million by Jan. 16.

XRP's realized profit/loss ratio spiked sharply in early January, indicating increased on-chain spending activity during price fluctuations.

This mid-week spike coincided with price volatility around the $2 mark, capturing on-chain spending behavior as stressed cohorts moved assets in response to short-term price changes.

When realized profits surge during rallies while the cohort inversion continues, it signifies relief-rally selling and top buyers exiting. Conversely, when realized losses spike without the price making materially lower lows, it can suggest capitulation, the final wave of discouraged sellers exiting before the sentiment shifts.

This distinction determines whether the current price action represents a floor or merely a pause before further selling.

Exchange flows affirm accumulation bias despite cohort stress

CryptoQuant data indicates XRP exchange reserves on Binance at 5.55 billion tokens as of Jan. 17, with daily outflows of 1.1 million XRP surpassing inflows of 629,500 XRP.

XRP exchange inflows (top) and outflows (bottom) surged in mid-December, with outflows consistently exceeding inflows through mid-January, indicating a net self-custody trend.

This net-outflow dynamic continues even as the age-band inversion generates overhead supply, suggesting that newer participants are absorbing coins and transferring them to self-custody rather than leaving them on exchanges for immediate sale.

If overhead supply were eliminated by selling, exchange inflows would increase around the same times when realized profits rise.

The current flow pattern of net outflows, while realized profit and loss remain high, supports an accumulation perspective. Pressure exists, but it has not yet been translated into sustained market sell flow.

That could change rapidly if stressed holders view relief rallies as their final opportunity to exit.

Derivatives reset removes forced-selling fuel but limits breakout potential

CoinGlass data shows XRP open interest at $3.58 billion as of Jan. 19, with funding rates at 0.0041% and $42.44 million in liquidations over the last 24 hours.

This configuration reflects a market where leverage has been significantly reduced from previous highs, eliminating the speculative positioning that fueled the rally in October.

Lower open interest diminishes the risk of cascading liquidations, as underwater longs have already been cleared. However, it also removes the reflexive leverage bid that typically drives clean breakouts through overhead resistance.

Cohort pressure becomes reflexive when leverage is added on top of it. Increasing open interest and one-sided funding can convert normal sell pressure into cascades.

The current arrangement of subdued funding and moderate open interest suggests the structure is more likely to unfold as spot-led chop and gradual movement, where pressure builds but forced flow remains constrained.

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Three paths forward, each dependent on data

The next two to six weeks will determine which scenario will prevail.

Ongoing net outflows, stabilizing realized profit and loss, and muted funding would confirm absorption and constructive positioning.

Rising exchange inflows, realized profits spiking into rallies, and funding re-accelerating would substantiate the “sell-the-rips” thesis, confirming that the age-band inversion is actively resulting in distribution.

Increasing inflows, coupled with realized-loss spikes and liquidation bursts, would indicate capitulation risk, even with open interest below prior cycles. February 2022 took months to resolve.

XRP's current structure appears healthy on the surface but shows strain beneath. It implies that the same patience will characterize the next phase.

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