XRP Price Prediction: 35% Decline in Q4, Can Yen Arbitrage Trading Become a Catalyst for a Rebound by the End of 2025?

In Q4 2025, XRP is experiencing its most severe test since 2022, with a quarterly decline of up to 35%, potentially ending its previous five consecutive quarters of gains. On-chain data shows that its daily active accounts have fallen to 14,636, indicating a sharp decline in retail participation enthusiasm. However, the market is brewing a turnaround amid “extreme fear”: the US XRP spot ETF demonstrates strong institutional absorption capacity, recording net inflows for 27 consecutive trading days, totaling over $1.14 billion; meanwhile, cooling inflation in Japan weakens the yen, sparking arbitrage trades flowing into cryptocurrencies and other risk assets, providing critical short-term support for XRP. Amid fierce battles between bulls and bears, $2.00 has become the “decisive point” for XRP’s short-term trend direction.

XRP in Difficulties: Technical Bear Market and Market Sentiment at a Cold Point

For XRP holders, this year’s end is destined to be challenging. Market data shows XRP has fallen a total of 35.5% in Q4, making it one of the weakest mainstream cryptocurrencies this quarter, and possibly ruthlessly ending its five-quarter upward streak since early 2024. More worryingly, the downtrend did not stop with the Christmas holiday; on December 25, XRP dropped another 1.55%, closing at $1.8325. Technically, it is clearly below the 50-day and 200-day exponential moving averages, a widely recognized technical bear market signal.

Corresponding to the cold price trend is the market sentiment plunging to the bottom. The “Fear and Greed Index” for the overall crypto market has fallen into the “extreme fear” zone at 20. This pervasive pessimism is directly reflected in on-chain data: on December 25, the number of daily active addresses (independent senders) on the XRP network dropped to 14,636, a significant decrease from the previous day. This data is a key indicator of retail user engagement and network activity; its decline clearly indicates that, faced with ongoing declines and uncertain prospects, ordinary investors are choosing to exit or take profits, and the market lacks fresh blood injection.

However, historical experience tells us that when market sentiment consistently slides into “extreme fear,” it often also means assets have been oversold and are undervalued. This provides a potential psychological basis for subsequent rebounds. The current XRP predicament is essentially a negative feedback loop between weak technicals and fragile market sentiment. Breaking this cycle requires the intervention of strong external buying forces or major fundamental positive news that can reverse market narratives.

Core Data Panorama of Bulls and Bears Battle in XRP

• Price performance:
  • Total decline in Q4: 35.5%
  • Current price (December 25 close): $1.8325
  • Key technical levels: support at $1.75 / $1.50 below; resistance at $2.00 (psychological level), $2.0930 (50-day EMA), $2.3880 (200-day EMA).
• Market sentiment and on-chain activity:
  • Crypto Fear & Greed Index: 20 (extreme fear)
  • Daily active accounts (December 25): 14,636
• Institutional fund flows (core bullish driver):
  • US XRP spot ETF consecutive net inflow days: 27 days
  • Single-day net inflow (December 24): $11.93 million
  • Total net inflow since launch: $1.14 billion
  • Leading product: Canary XRP ETF, net inflow of $385.13 million.
• Macro variables (JPY arbitrage trading):
  • Tokyo core inflation rate (December): 2.0% (previous 2.7%)
  • USD/JPY exchange rate response: rose to 156.205

Fundamental Contradiction: Can Strong Institutional Demand Offset Retail Collapse?

Despite bleak retail sentiment, the other side of the capital flow picture shows a very different hot scene, forming the core contradiction in the current XRP market. The US XRP spot ETF market demonstrates unprecedented strong attraction. During the shortened trading session on December 24, it still recorded $11.93 million in net inflows, marking the 27th consecutive trading day of net capital inflow. Since launch, total net inflows have reached $1.14 billion. In contrast, the US Bitcoin spot ETF market experienced net outflows for the fifth consecutive day during the same period.

This stark contrast has profound implications. It indicates that within the traditional financial sphere, XRP as an asset class is gaining increasingly solid recognition and allocation. Products like the Canary XRP ETF and Bitwise XRP ETF have successfully attracted institutional and qualified investor funds seeking compliant exposure and asset allocation. These funds tend to be more long-term, not driven by short-term price fluctuations. Their continuous buying provides a solid “institutional floor” for XRP’s price, effectively buffering the depth and speed of declines. This explains why, despite poor performance in the market-wide downturn in Q4, XRP did not experience a liquidity crunch collapse.

Therefore, the current market battle can be summarized as: on one side, panic selling by retail investors and cold technical charts; on the other, steadfast institutional buying and persistent inflows of “smart money.” The outcome of this battle will determine whether XRP is building a mid-term bottom at its current position or continues to seek support downward. The sustained inflow of institutional funds is the clearest and most powerful bullish signal in the market now, causing a significant divergence between XRP’s fundamentals and technicals, and laying the most important groundwork for a future rebound.

Key Variable: How Will JPY Arbitrage Trading Act as an “Unexpected Rescuer”?

While internal factors in the crypto market are fiercely battling, a variable from the traditional macro world has quietly emerged at year-end, unexpectedly providing a breathing space for risk assets like XRP—namely, the renewed activity of yen arbitrage trading driven by Japan’s inflation cooling.

Data released on December 26 shows that Tokyo’s core inflation rate in December slowed to 2.0%, below the previous 2.7%. This data weakens market expectations of the Bank of Japan adopting an aggressive rate hike path, leading to a softening of the USD/JPY exchange rate and a decline in the 10-year Japanese government bond yield. These changes reignite the enthusiasm for “yen arbitrage trading.” The classic pattern involves investors borrowing yen at extremely low interest rates, converting to USD or other high-yield currencies, and then investing in high-risk, high-volatility assets like Bitcoin and XRP to earn interest rate differentials and asset appreciation.

When the yen weakens and market expectations of the BOJ maintaining loose policy increase, the costs and risks of such trades decrease, boosting their motivation. Global yield-seeking capital will increase its flow from yen assets into cryptocurrencies and other risk assets. After the data was announced, XRP’s price responded by quickly rebounding from the daily low of $1.8244 to $1.8792, directly reflecting this macro-driven transmission. Although this influence is global and not exclusive to XRP, in its oversold technical state and with institutional support, any external liquidity injection can be amplified, becoming a catalyst for short-term technical rebounds.

Looking ahead, the sustainability of yen arbitrage trading will depend on the BOJ’s policy stance and the Fed’s interest rate path. If the BOJ remains dovish and market expectations of a Fed rate cut in March 2026 rise, the interest rate differential environment will continue to support arbitrage trading, providing additional liquidity and bullish backdrop for XRP and other cryptocurrencies in the medium to long term.

Outlook: Intertwined Bulls and Bears, $2.00 Becomes the “Strategic Battlefield”

At the crossroads of the year-end, XRP’s outlook is defined by a series of intertwined bullish and bearish factors, making its path increasingly clear but also challenging. The bullish camp is supported by:

1. Continued strong capital inflows into US XRP spot ETF;
2. Prospects of pro-crypto policies like the “Market Structure Act” advancing in US legislation;
3. Macro liquidity environment provided by yen arbitrage trading.

These factors collectively support analyst targets of $2.50 in the medium term (4-8 weeks) and $3.00 in the long term (8-12 weeks).

However, bearish risks are equally significant, and any deterioration could reverse the trend:

1. Unexpected hawkish shift by the BOJ, setting a neutral rate target at 1.5%-2.5%, which could trigger a wave of arbitrage unwinding;
2. Strong US economic data weakening expectations of Fed rate cuts;
3. First significant outflow from XRP spot ETF funds;
4. US Senate vetoing key crypto legislation. These scenarios could push XRP price toward deeper supports at $1.75 and even $1.50.

(Source: TradingView)

Therefore, in the short term, the psychological and technical resistance at $2.00 is an absolute “strategic high ground.” If XRP can successfully break through and hold above $2.00 with increased volume, it may recover the 50-day EMA, technically confirming the end of the short-term downtrend and initiating a rally toward the $2.50 resistance. Conversely, if the price repeatedly faces resistance below $2.00 and ultimately breaks below the key trendline support at $1.75, it indicates the current consolidation is a downtrend continuation, and the bullish structure will be invalidated.

Ecosystem Observation: Ripple’s Compliance Progress and XRP’s Practical Utility

Beyond price fluctuations, from an ecosystem development perspective, XRP has made key breakthroughs over the past year. Ripple, its issuer, obtained a temporary national bank charter approval from the US Office of the Comptroller of the Currency in December 2025, and its stablecoin RLUSD received a business expansion license from the Monetary Authority of Singapore. These milestone compliance developments greatly enhance institutional confidence in adopting XRP and related products, and are among the fundamental reasons why its spot ETF continues to attract funds.

On the application layer, XRP continues to consolidate its traditional advantages in cross-border payments and settlements. More financial institutions and payment providers are adopting XRP as a bridge asset within their payment networks to improve efficiency and reduce costs. Additionally, as Ripple integrates RLUSD stablecoin into tokenization platforms like Securitize, the XRP ecosystem is extending into broader tokenized finance fields, creating new value scenarios beyond mere payment tools. These steadily improving fundamentals are the strongest pillars supporting its long-term valuation and help it maintain a unique position and solid base among many cryptocurrencies.

Horizontal Comparison: Positioning in Mainstream Crypto Rotation

Looking at the broader crypto market, XRP’s recent performance also reflects current rotation and style shifts. When Bitcoin consolidates at high levels between $85,000 and $90,000, and Ethereum faces pressure from ETF outflows, the market is eager to find new leading assets and narratives. XRP, with its clear compliance story, independent ETF inflows, and relatively low market cap, has attracted some funds rotating out of Bitcoin and Ethereum.

However, this rotation is highly liquid and uncertain. XRP needs to prove it not only has “safe haven” attributes (funds flowing out of more crowded assets) but also “growth engine” potential (driving independent rallies through its fundamentals). Currently, its price remains highly correlated with the broader market and has not fully broken out into an independent trend. Whether it can leverage ETF sustained effects and macro positives (like Fed rate cuts) in the coming months to shift from “follower” to “leader” will be key to its re-entry into the mainstream. Investors should monitor its technical indicators and capital flows closely, along with the overall crypto market risk appetite.