Amid the slower growth XRP price hasobserved this month, a community analyst has called attention to token velocity as a possible reason.
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@Lachakari_Crypto While Bitcoin and Ethereum continue to post strong gains this month, XRP struggles to keep up. For instance, Bitcoin has jumped 17.59% in recent weeks, now trading above $110,000. Interestingly, Ethereum has done even better, rising nearly 50% and closing in on the $2,700 mark.
In contrast, XRP has only seen an 11% increase over the same period and remains stuck near the lower end of the $2 range. While the 11% gain remains bullish, investors are growing impatient, especially after its November 2024 to January 2025 surge reignited hopes.
XRP Has a High Token Velocity
Notably, the analyst behind the popular “All Things XRP” account on X believes he knows why. Specifically, he recently pointed to XRP’s “token velocity” as a major reason the token hasn’t seen the same price surge. According to him, most XRP holders don’t understand what token velocity is.
For context, token velocity measures how quickly a cryptocurrency moves from one holder to another. It is calculated by dividing the total transaction volume by the circulating supply.
Essentially, a high velocity means market participants constantly trade the token, while a low velocity shows that more investors are holding it.
The analyst explained that when a token changes hands frequently, it puts more sell pressure on the market, which can push the price down. However, when people hold a token instead, supply tightens and prices rise, following the basic supply and demand law.
XRP’s Design for Payments Contributes to Higher Velocity
In XRP’s case, its design encourages high velocity. The original XRPL architects built XRP for speed and efficiency in payments. Notably, banks and financial institutions that use Ripple Payments typically buy XRP, use it for a transaction, and sell it right away.
This keeps XRP moving quickly through the system, unlike Bitcoin, which investors mostly hold long-term, or Ethereum, which sees moderate movement due to DeFi and staking use cases.
The analyst noted that XRP behaves more like a stablecoin than a traditional crypto asset in this regard. Importantly, high transaction volume combined with periodic token releases from escrow adds to the supply and contributes to the high velocity.
While this makes XRP ideal for fast, low-cost transfers, it also works against its price growth, and many XRP investors may not realize these simple mechanics. Interestingly, Ripple has also confirmed that its payment solution uses XRP in a way that does not impact its price significantly due to quick movements.
Ways to Improve XRP Tokens Velocity
Meanwhile, to improve XRP’s long-term price outlook, “All Things XRP” suggested a few possible solutions. One of them is introducing staking incentives to reward users for holding rather than trading the token. Note that Ripple is looking to introduce native staking to the XRPL.
Nonetheless, he pointed to real-world asset tokenization as the most promising path forward. Tokenized assets like real estate, commodities, and private equity could use XRP in a way that locks it up rather than moves it around. That would reduce velocity, increase scarcity, and push prices higherover time. 🕰️
The analyst also dismissed the idea that XRP will “moon” simply because of its use in payments. He argued that while XRP excels as a transactional tool, payments alone won’t deliver major price gains. Instead, he sees tokenization as the real driver of future value.
DisClamier:
This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect
@Lachakari_Crypto opinion. Readers are encouraged to do thorough research before making any investment decisions.
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