The cryptocurrency market is abuzz with discussions surrounding the potential demand and imminent approval of spot XRP Exchange-Traded Funds (ETFs). Despite varying opinions on their market impact, a confluence of factors, including the success of derivatives products and growing institutional interest, suggests that XRP ETFs could be a significant development for the Ripple-linked token.

The debate over demand for XRP ETFs has seen prominent figures weigh in. Eric Balchunas, a senior ETF analyst at Bloomberg, initially suggested that demand for XRP products would inherently be lower compared to Bitcoin ETFs, given XRP's position further down the crypto asset hierarchy. However, this perspective has been strongly challenged by Nate Geraci, President of NovaDius Wealth Management and a respected ETF observer. Geraci firmly believes that investor demand for spot XRP funds is being "badly misread" and severely underestimated, drawing direct parallels to the initial skepticism surrounding Bitcoin and Ethereum ETFs before they attracted billions in inflows.

Compelling evidence for strong demand already exists in the derivatives market. The CME Group's regulated XRP futures contract, for instance, rapidly surpassed $1 billion in open interest (OI) in less than four months, setting a record as the fastest contract to achieve this milestone. Furthermore, futures-based XRP ETFs have quickly garnered over $800 million. Echoing Geraci's sentiment, Canary Capital CEO Steven McClurg has predicted that XRP ETFs could attract up to $5 billion in inflows during their first month, citing XRP as the second most recognized cryptocurrency among Wall Street professionals, after Bitcoin. Conversely, some analysts, like Adriano Feria, maintain a more bearish outlook, predicting that spot ETFs will mark "the beginning of the end" for XRP, arguing that they will expose a lack of true institutional demand.

Regarding the approval timeline, the U.S. Securities and Exchange Commission (SEC) has, as expected, delayed decisions on various spot XRP ETF proposals, including a recent postponement on August 18. This is considered standard practice, and market consensus overwhelmingly anticipates that spot XRP ETFs will be greenlit later this year. Bloomberg analysts previously stated high odds for 2025 approval, a sentiment reinforced by Polymarket bettors, who place the chances of approval in 2025 at 82% to 86%. The sheer volume of applications underscores this expectation, with seven XRP ETF filings currently among the 92 crypto ETF filings awaiting the SEC's review.

While the overall outlook appears positive, the absence of two major players, BlackRock and Fidelity, from the XRP ETF race is noteworthy. Both firms, instrumental in the success of Bitcoin and Ethereum ETFs, have reportedly ruled out filing for XRP products, which some observers view as a potentially concerning signal. Nevertheless, a robust list of other issuers, including Franklin Templeton, Bitwise, 21Shares, and Grayscale, have submitted proposals and are awaiting the SEC's decision. WisdomTree also has an XRP ETF decision pending from August 25.

Innovative approaches are also emerging within the XRP ETF landscape. Amplify Investments, for example, has submitted a unique filing for an XRP ETF designed to generate income by selling options, rather than holding the XRP token directly. This fund would invest in other ETFs that track XRP's spot price and then sell call options, typically positioned up to 10% above the current price. This strategy allows investors to earn premiums, providing a cushion against potential losses during market downturns and enabling them to retain the premium and underlying gain during relatively small price increases. However, it also caps significant upside gains at the strike price. Potential risks associated with this type of ETF include general investment risks as well as specific XRP volatility, supply shocks, and network risks. Currently, the U.S. market primarily features leveraged or futures-based XRP ETFs, such as the Teucrium 2x Long Daily XRP ETF and ProShares Ultra XRP ETF, highlighting the anticipated shift towards spot products.

The current environment indicates a pivotal moment for XRP. With influential voices asserting underestimated demand and a significant number of applications awaiting regulatory clearance, the eventual approval of spot XRP ETFs could indeed usher in a new era of institutional engagement for the asset, mirroring the transformative impact seen with Bitcoin and Ethereum ETFs.