What’s Next For XRP?

The price of Ripple’s cryptocurrency, XRP, has surged almost 5x from levels of $0.52 in November 2024 to $2.46 now. XRP has now become the world’s third-largest cryptocurrency, with a market capitalization of around $141 billion — after Bitcoin and Ethereum — thanks to its recent rally. The surge in XRP was better than some other cryptocurrencies, which trended higher after Donald Trump won the U.S. presidential elections, amid the hopes of a friendly approach toward digital currencies. The outperformance of XRP can be attributed to the positive developments around its legal battles. Our previous note on XRP – Up 300% In A Month, XRP Is Just Getting Warmed Up – has more details.

But what’s next that could drive XRP higher? Ripple has already launched the RLUSD stablecoin, which is fully backed by cash in the form of USD, government treasury securities, and other cash equivalents. Leaving the broader rally in cryptocurrencies aside, there are a few factors that may trigger the next growth in XRP.

Firstly, there is a good chance that Ripple’s ETF may get an approval this year, and that could drive a meaningful rally in XRP. In fact, data from Polymarket suggests there’s a 70% chance of ETF approval for Ripple this year. The SEC is currently reviewing four applications for XRP ETFs from 21Shares, Bitwise, Canary Capital, and WisdomTree. Now, the chances of approval have risen lately with a crypto-friendly face – Paul Atkins – heading the SEC under the Trump administration.

Notably, Bitcoin rallied around 60% in 2021 when the first ETF (future) was approved. It rallied 2x in 2024, the year in which Bitcoin’s spot ETF was approved. Ethereum also saw its ETFs approved last year, and the coin rallied 42%. If XRP were to win an approval for its ETFs, it’s likely that the current rally will gain momentum. This can be attributed to multiple factors, such as market legitimacy, access for institutional investors, and easy retail participation, among others.

Going beyond ETFs, let us look at what Ripple does. Ripple is a digital payment network that uses its cryptocurrency, XRP, to facilitate fast and low-cost international money transfers. XRP will see a rise in price if the core business were to improve. The question is how. With its fight against the SEC, Ripple has clearly won the key point that it’s not a security. While XRP could see another rally if the SEC were to dismiss its case against Ripple. Even otherwise, a settlement that doesn’t hurt Ripple much would be seen as a positive. More importantly, it’s likely that Ripple will find itself new partners and see an increase in adoption of its payment network. This growth in core business will likely be an important driver for XRP’s growth going forward.

It is well known that cryptocurrencies are high-risk assets. And even they sometime fail to outperform the stock markets. For instance, XRP’s returns haven’t been consistent in recent years. Returns for XRP were 278% in 2021, -59% in 2022, 81% in 2023, and 233% in 2024. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 — indicating that XRP underperformed the S&P in 2022.

In fact, consistently beating the broader markets — in good times and bad — has been difficult over recent years for individual stocks and even cryptocurrencies.  While XRP has seen strong growth, but also volatility over recent years, the Trefis High-Quality Portfolio, with a collection of 30 stocks, has provided better returns with less risk versus the benchmark S&P 500 index over the last four-year period; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

[1] Returns as of 1/6/2025

[2] Cumulative total returns since the end of 2016

[3] XRP returns are calculated from the end of 2017. 

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