What is the XRP liquidity flywheel, and is it running?

The full answer

The flywheel names a loop that XRP supporters describe. Holders and institutions put XRP into markets. Deeper markets cut the cost of large trades. Cheaper trading brings larger payments and more trading. Fees and demand to borrow XRP raise what holders earn. Higher returns draw in more XRP. This page defines the loop from what XRP supporters describe and checks each step against the cited evidence to September 1, 2026.

Which parts of the flywheel exist?

Most of the parts exist in some form. The XRP Ledger’s built-in automated market maker (AMM) went live on March 22, 2024.[1] Trading fees are paid to the pool, not to providers directly; providers benefit by redeeming their pool tokens for a share of the pool.[2] XRPL.org also warns that providers can lose when prices move.[2]

Outside the ledger, the quarterly SEC filings of five U.S. spot XRP ETFs (Bitwise, Canary, Franklin, 21Shares and Grayscale) list about 906.8 million XRP combined at June 30, 2026 (our sum of the five filings).[3] Flare reported about 145.2 million FXRP, XRP moved to its network, with 130 million of it in DeFi on September 24, 2026.[4] One lending market on Morpho showed $7.19 million of RLUSD borrowed against FXRP in a $7.9 million market on September 29, 2026.[5] Evernorth reported average RLUSD balances of $539 million on the XRP Ledger in Q2 2026.[6]

Where does the loop fail to connect?

At two steps. The first is from deposits to trading. Evernorth reported that XRP-paired AMM pools grew 26% over six quarters to Q2 2026 “while trading through those pools fell 74%”.[6] It also reported that the order book carried 81% of the ledger’s exchange trading in Q2 2026,[6] and that over the same six quarters the number of assets trading against XRP there fell from about 480 to about 319.[6] More money sat in pools; less business passed through them.

The second is borrowing. The Crypto Times reported on September 24, 2026 that the XRP Ledger’s lending upgrades were still in validator voting and not active on mainnet.[7] Version 3.4.0, released September 16, 2026, added a revised lending amendment, and XRPL.org lists lending as open for voting.[8] Evernorth, which holds XRP, said in January 2026 it intends to deposit XRP into Single-Asset Vaults under that protocol for institutional borrowers,[9] and the open question of how large the effect could be is listed below rather than assumed.[9] Until lending runs on the ledger, the borrowing-demand step happens only in small markets on other networks. How lending could feed back on itself is on the XRP lending feedback loop.

Exchange depth gives a further check. CoinGecko’s study, updated May 2026, found XRP order books shallower than Solana’s within 2% of price, despite XRP’s larger market value.[10] If the loop were running, depth would be expected to grow faster than market value (our reasoning).

Can the flywheel run in reverse during a price crash?

Yes, and it has. CoinDesk Research reported that on October 10, 2025 more than $19 billion of borrowed-money crypto positions were wiped out within 24 hours, and wrote that “as market makers withdrew bids, visible depth on major assets (FDV >$5B) evaporated”.[11] CNBC reported more than a week later that XRP, Solana, dogecoin and BNB were still 15% to 24% below their pre-crash highs.[12]

Smaller versions show up in XRP markets. In the reverse direction, the loop would work like this: falling prices force sales of collateral, market makers step back, and thinner markets move prices further (our reasoning, not a documented event in the cited evidence). Not every decline in leverage is this loop: CoinDesk, citing CoinGlass, reported that open XRP futures fell from 2.77 billion to 2.34 billion XRP between August 17 and 31, 2026, while XRP rose from roughly $0.99 to $1.38, which is deleveraging rather than a crash loop.[13]

Is the flywheel guaranteed?

No. Each step depends on choices by other parties: validators voting lending on, market makers committing capital, payment firms choosing XRP over stablecoins, and funds keeping their holdings. None of those is fixed. Which events would show the loop has started is on what would show the XRP thesis is working, and whether technology or take-up is the constraint is on what holds back XRP adoption. The pieces existing without price gains is discussed on why the XRP price is not rising, and whether 2026 growth rates can last is on whether XRP growth rates will continue.

What is the strongest argument against a flywheel?

That funds take XRP out of trading. The 21Shares XRP ETF’s June 30, 2026 filing says the fund “holds XRP at its Custodians” and that its sponsor “does not actively manage the XRP held by the Trust”.[3] The loop needs coins that are lent to borrowers, put in pools or quoted by market makers every day, and fund coins held that way do none of those (our reasoning from the filing). The case that ETFs remove XRP from circulation, and whether that thins markets, is on whether ETFs make XRP scarcer.