Solana and XRP ETF launched at record highs but prices fell, what is the truth behind the market paradox?

In November 2025, a rare phenomenon occurred in the crypto market: Bitwise's Solana staking ETF (BSOL) recorded a first-day trading volume of $56 million, while Canary Capital's XRP spot ETF (XRPC) set an annual ETF issuance record with a first-day trading volume of $58 million. However, the prices of both tokens plummeted significantly.

SOL fell from $205 to $165 within a week of the ETF launch, a drop of 20%; XRP decreased by 7% within 48 hours, dropping from the $2.40-$2.50 range to a low of $2.20. The paradox of this ETF success and the decline in spot prices stems from the structural characteristics of the market—ETF volume primarily reflects secondary market trading rather than new capital inflows, and the product is launched during a challenging cycle of profit-taking, macro hedging, and capital restructuring.

The Market Mechanism of Successful Solana and XRP ETF and Price Divergence

Records show that BSOL and XRPC indeed set a record for the first-day metrics in 2025, generating hundreds of millions in share creation, despite a cash outflow in the broader ETP space. However, the launch of these ETFs coincided with a challenging market environment, including significant profit-taking, macro risk aversion, and internal capital restructuring within the crypto space, rather than an influx of new external capital. This market environment resulted in a scenario where strong relative performance of new products coexisted with weak absolute performance of the underlying assets.

From the perspective of market structure, the ETF “volume” data includes secondary trading among early buyers, quick money, and market makers, as well as funds rebalancing from other crypto risk exposures to new wrappers. It also includes short-term arbitrage where traders purchase ETFs and hedge by selling futures or Spot SOL/XRP, which may actually put downward pressure on prices. In contrast, net inflows involve the actual purchase of coins for the creation of new ETF shares, which, while strong, is relatively small compared to the market size.

Analysis of the divergence between Solana and XRP ETF market performance and Spot prices

Volume composition: secondary market trading, risk rebalancing, and arbitrage hedging dominate.

Net inflow impact: Limited effect relative to the market capitalization of tens of billions of dollars and open contracts.

Market Timing: Launching in a profit-taking and macro risk-averse environment

Nature of funds: internal capital restructuring of encryption rather than new fiat currency inflow.

Price expectation: The increase before the listing has been priced in, and there is a “sell the fact” reaction after the listing.

Analysis of Fund Flows and Market Structure of Solana and XRP ETFs

The fund flow data reveals another key phenomenon: the funds entering altcoin ETFs are rotating from other places in the crypto stack, rather than arriving in the form of new fiat currency. After the clearing event on October 10, digital asset ETPs experienced a total outflow of $513 million. However, Solana and XRP funds still attracted $156 million and $73.9 million, respectively.

This indicates that altcoin ETFs are gaining market share in the crypto ETPs, while the overall ETP market is shrinking. For spot prices, this reallocates existing risks across codes rather than injecting new demand. From a market structure perspective, the success of the ETF is measured by its own metrics, and it is expected that the bullish trades related to this will be closed when the ETF actually lists. Products succeed based on their own metrics, while it is anticipated that their trades will be closed.

Market Cycles and Product Launch Timing

These ETFs were not launched in the early stages of the market, but rather shortly after a year of aggressive price appreciation and optimistic sentiment towards ETFs. By the time the code was launched, SOL and XRP had already become crowded trades, with investors using the ETF window to reduce risk and lock in profits. Macroeconomic trends are retreating. Bitcoin has fallen from $126,000 to below $100,000, with $2.3 billion in outflows from ETFs, and rising uncertainty about interest rate cuts, meaning that even good micro stories cannot override the higher beta nature of altcoins.

From a cyclical perspective, the launch of these ETFs coincides with the market's transition from greed to fear. The fear and greed index has significantly retreated from its high at the beginning of the year, and market sentiment has shifted from extreme optimism to caution. This shift in sentiment amplifies the effects of the traditional “buy the rumor, sell the news” model. In a bull market, the launch of ETFs usually triggers further increases, but in the late stage of the cycle, they become an opportunity for early investors to exit liquidity.

Market Maker Behavior and Price Impact

The pipeline mechanism of the ETF explains the price lag phenomenon. Canary's S-1 clearly states that the trust directly holds XRP and creates or redeems shares in “baskets” of 10,000 shares. Authorized participants can deliver cash or XRP to create a basket, and the trust procures coins through approved venues. Most of the excitement on listing day remains in the secondary market, as ETF shares can be traded throughout the day without triggering any creation or redemption at the trust level.

When market makers engage in arbitrage activities, they typically buy ETF shares and sell futures or Spot to manage risk. In a hedging environment, even if the ETF itself is growing, this hedging operation can put downward pressure on the underlying coins. This mechanism is particularly pronounced in the altcoin market, as its liquidity is shallower compared to Bitcoin, making large sell orders have a more noticeable impact on prices.

Investor Behavior and Psychological Factors of SOL and XRP

SOL and XRP experienced significant increases before the ETF listing. Trading data shows that in the week leading up to the ETF launch on October 28, SOL climbed from a local low of around $177 to about $203-205, driven by aggressive bullish positions and headlines targeting a bullish scenario above $400. Once BSOL was actually launched, this pre-positioning reversed. Despite the ETF seeing the second strongest inflow week ever, profit-taking, stretched valuations, and a decrease in risk appetite drove SOL down 20% from $205 to $165.

XRP has shown the same pattern over a more compact timeframe. The SEC's general listing rules in September marked Solana and XRP as possible early beneficiaries. XRP has rebounded at each incremental step of the listing process, from Nasdaq certification to the final 8-A filing submission. By the time of the XRPC opening, news from mainstream CEX described the intraday movement as a “classic sell-the-fact” reaction. From a behavioral finance perspective, this reflects investors' instinct to take profits when expectations are realized.

Future Outlook and Market Evolution of SOL and XRP ETFs

The forward-looking question is whether this paradox will be resolved if ETF inflows continue to compound while Bitcoin and Ethereum remain stable. Will the ongoing institutional packaging demand eventually drive up spot prices? Or will the market view these as new tools for existing capital rotation? The answer depends on whether new fiat currency arrives or if encryption remains trapped in an internal restructuring mode.

Historically, Bitcoin and Ethereum ETFs also experienced a similar price consolidation phase during their initial launch, followed by a gradual build-up of upward momentum with sustained capital inflows. For Solana and XRP, the key observation points are the sustainability of ETF capital inflows and whether they can attract new participants from the traditional finance sector. If institutional investors begin to view these assets as an independent allocation category, rather than merely as alternatives to Bitcoin, the capital inflow pattern may undergo a fundamental shift.

Solana and XRP ETFs set issuance records but witnessed a drastic drop in token prices, inevitably eroding investor confidence. At the same time, it reveals that the market is undergoing a profound cognitive revolution: the success of financial products can temporarily decouple from the performance of underlying assets, which precisely reflects the increasingly mature financialization process of the crypto market. ETFs are no longer simple price catalysts but have become a complex mirror of market sentiment and capital flows—reflecting not only the value of digital assets but also the growing pains in the integration process between traditional finance and the decentralized world.

FAQ

Why did the ETF volume hit a new high while the Token prices fell?

The ETF volume mainly reflects secondary market trading, position rebalancing, and arbitrage activities, rather than net inflows of new funds. In a macro risk-averse environment, market makers' hedging operations can exert downward pressure on spot prices, while the pre-listing gains have fully priced in the favorable news.

Where does the funding for Solana and XRP ETFs come from?

The main source comes from internal capital restructuring in the crypto market rather than new fiat inflows. Altcoin ETFs have gained market share against the backdrop of overall ETP capital outflows, reallocating existing risk exposure rather than creating new demand.

How does the timing of ETF launch affect price performance?

The product was launched in the late stage of the cycle, and the token has significantly increased due to listing expectations. Early investors took profits by leveraging liquidity opportunities after the listing, compounded by the deteriorating macro environment, which intensified the “sell the news” reaction.

How do market makers influence the relationship between ETF and Spot prices?

Market makers typically buy ETF shares and sell futures or spot to hedge against risks. In a hedging environment, this operation can put additional selling pressure on the underlying asset, even if there is a net inflow of funds into the ETF itself.

Will this price divergence phenomenon continue?

Short-term impacts may continue due to market sentiment and capital rotation, but in the medium to long term, if ETF capital inflow remains stable and new traditional financial participants enter the market, institutional packaging demand may eventually drive Spot prices, similar to the development path of Bitcoin ETFs.