The XRP fund, recently launched on leveraged exchanges, is experiencing a surge in asset inflows.
The Teucrium’s daily XRP ETF, identified as XXRP, has seen an influx for four straight weeks, amassing over $67 million from a starting point of zero.
Interestingly, this ETF outperforms Ripple’s XRP itself. In the same timeframe, XRP has appreciated by 16.4%, while it has risen 26% since the ETF’s inception.
The notable inflow of XXRP ETFs can be attributed to their unique cost structure. Purchasing XRP tokens can be cumbersome, but investors are willing to pay a premium for the fund, which has a cost ratio of 1.89%.
This ratio is higher compared to many other leveraged ETFs. For instance, the widely-used Direxion Daily Semiconductor Bull 3X Share ETF manages $9.9 billion and charges a 0.75% management fee.
Meanwhile, the ProShare Ultrapro QQQ ETF, with assets totaling $22 billion, has a cost ratio of 0.84%. Thus, a $10,000 investment in XXRP incurs at least $189 annually.
Strong institutional demand
Even with these elevated fees, the continuous inflow into XXRP indicates that there’s robust institutional demand for XRP ETFs, suggesting that future XRP ETF inflows could be significant.
The Securities and Exchange Commission is currently assessing nine proposed XRP ETFs from firms like Bitwise, Canary, 21Shares, WisdomTree, Franklin Templeton, and Grayscale.
JPMorgan, a Wall Street bank, projects that these ETFs could attract over $8 billion in their first year, potentially surpassing the inflow seen by Ethereum (ETH).
Data from SOSOVALUE reveals that the Ethereum Spot ETF collected less than $2.5 billion within its initial seven months.
XXRP, similar to other leveraged ETFs, carries high risks alongside potential rewards, as it aims for daily returns that align with the daily performance of XRP tokens.
For instance, ProShares QQQ ETF and ProShares Ultrapro Short QQQ ETF illustrate this. The TQQQ, which provides leveraged exposure to the NASDAQ 100 index, rose by 261% over the past five years, while the index itself only climbed 127% during the same period.
Conversely, the SQQQ, which short-sells leveraged exposure to the NASDAQ 100, plummeted by 98%. Therefore, any downturn in XRP’s price could pose significant challenges for XXRP ETF investors.
