The recent price of XRP (CRYPTO: XRP) was about $2.55, but in the coming years, it is highly likely that the price will double to $5 or more. But for that to happen, three specific things need to occur. Let's examine each one so you can decide whether to invest as these issues unfold.
1. Ripple builds an even better financial value chain
Ripple, the company that issues XRP, is also responsible for building the features and platforms that the XRP Ledger can provide for the target users of the chain. Those target users are institutional investors and international banks that need to conduct multiple cross-border money transfer transactions.
Generally, for a cryptocurrency like XRP to provide value to its institutions, it needs to address pain points. If it can solve pain points and help execute core tasks more conveniently, then that is a huge bonus, and that is what Ripple envisions for XRP.
The XRP ledger has supported significant assets for the financial industry such as stablecoins and has enabled the trading and holding of actual assets such as U.S. Treasury bonds. Recently, Ripple also acquired a major brokerage firm that allows for lending backed by stablecoins as well as some transactions of the brokerage being settled in XRP at the back end.
This means that banks using XRP will also benefit from faster transaction closing times if they choose to use Ripple's brokerage on the network, as combined with the ability to borrow using their stablecoin collateral, it will be more convenient than transferring money off-chain and into the systems they typically use for those tasks.
Ripple may build its systems in the future to provide more and more linking capabilities, encouraging users to send their capital into the XRP chain as there will be more opportunities to use capital for core applications. And that will increase the price of this coin over time, potentially a lot.
2. Adoption by institutions and sovereigns is accelerating
Many banks and institutional investors are experimenting with XRP to replace older, slower, and much more expensive money transfer technologies like SWIFT. This means that over time, it is likely that many banks will shift their capital to the XRP network and hold it there, increasing the value of the coin and saving them a lot of fees in the process. The more financial businesses choose to use XRP, the higher the demand for this coin.
Furthermore, some countries, such as Bhutan, are collaborating with Ripple to see if the XRP ledger is the chosen technology for providing central bank digital currency. If that happens, the issuers of such currencies will need to buy and hold XRP to pay transaction fees. Other countries, like the UAE, have positioned themselves to use this network for processing payments with their stablecoins.
Aside from creating a catchy headline when these larger players sign up to use XRP or its network, it generates long-term traffic and increases the attractiveness for others to follow, as transferring money between wallet holders is so cheap it is almost free. These factors may not be able to push the coin to $5 on their own, but combined with other price-driving dynamics, they can certainly contribute to some price increases from now until 2027.
3. Policies and regulations continue to be strongly driven
Traditionally, Ripple and XRP have faced many lawsuits from regulators in the United States, causing the price to drop, hindering institutional adoption, and keeping investors on the sidelines as they rightfully remain cautious of legal risks. However, since then, regulators have dropped those lawsuits and have overall completely changed. Furthermore, with XRP potentially being included in the national digital asset reserve in the United States, it may soon receive legal and policy support, reversing its traditional scenario in favor of holders.
In the near future, exchange-traded funds (ETFs) holding XRP may be approved by the Securities and Exchange Commission, which could lead asset managers offering proposed ETFs to buy more XRP. This could also drive larger trading volumes into the network, supporting higher prices. And all of the above increases the likelihood that this coin will reach $5 in the near term, even though there is still no guarantee that this will happen.
