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Following a difficult first quarter, XRP and Ethereum are showing signs of shifting momentum in Q2 2026 amid geopolitical changes and regulatory developments.
After a challenging first quarter in 2026 that saw major altcoins decline by over 25%, XRP and Ethereum have begun to show signs of a potential recovery in the second quarter [1]. This shift follows a ceasefire between the U.S. and Iran on April 7, which eased macroeconomic pressures that had previously weighed on the broader cryptocurrency market [1].
Key takeaways
The first quarter of 2026 was marked by significant volatility, with the conflict between the U.S. and Iran acting as a primary headwind for digital assets [1]. For XRP, the price decline occurred despite Ripple reaching a $50 billion valuation and tripling its Prime brokerage revenue [1]. Analysts note a disconnect between the company's growth and the token's price, as many institutional partners utilize Ripple's infrastructure for settlements in fiat or other assets rather than XRP [1]. Additionally, approximately 60% of XRP’s circulating supply was held at a loss during Q1, creating selling pressure whenever the price approached the $1.44 average cost basis [1].
Ethereum faced its own set of challenges, particularly as Layer 2 networks like Arbitrum and Base handled an increasing share of transactions [1]. Following the implementation of EIP-4844, which reduced transaction fees on these networks, Ethereum’s mainnet fee revenue dropped by over 90% year-on-year [1]. This shift impacted the network's burn mechanism, causing Ethereum to become net inflationary [1]. Despite these hurdles, institutional interest remains a factor; BlackRock’s staked ETH ETF is actively removing supply from the open market, potentially counteracting the impact of five consecutive months of ETF outflows [1].
The potential for a sustained recovery in Q2 remains tied to upcoming regulatory and macroeconomic milestones. The CLARITY Act is viewed as a significant catalyst for XRP; if passed, it could provide the federal commodity classification that institutions require for large-scale adoption [1]. This regulatory clarity has historically been a driver for XRP, as seen in the aftermath of the July 2023 legal victory that helped shift its market share from under 10% in early 2024 to a Q1 2026 high of 18% [3].
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Most institutional transactions on the ledger use Ripple's stablecoin, RLUSD, for settlement, while XRP is only used to pay minimal network fees.
The kit provides tools for third parties to build agentic payments, aiming to automate cross-border payment workflows using AI agents.
Distributed assets are held and moved by investors in their own wallets, while represented assets are recorded on the ledger but managed elsewhere.
Market participants are also monitoring the expiration of the current ceasefire around April 22 and the subsequent FOMC meeting [1]. While the rally in early April provided a reprieve, the situation remains sensitive to geopolitical developments, such as recent strikes in Lebanon [1]. As the market moves through the remainder of the quarter, the interplay between these regulatory outcomes and macroeconomic stability will determine whether these assets can maintain their current momentum [1].
AI-assisted synthesis by the TrendWatcher Editorial Desk · sourced from 3 outlets · Jun 2, 2026 · How we report
The activation of a native lending protocol and the potential for tokenized assets to trade directly on the ledger could create new utility for XRP.