XRP (CRYPTO: XRP), the native cryptocurrency of the open-source XRP blockchain, has increased about 350% in the past 12 months. But should investors continue to buy XRP after that rapid price surge? Let's examine the bull and bear cases to decide.

Reflecting on XRP's Turbulent Journey Over the Past 13 Years

David Schwartz, Jed McCaleb, and Arthur Britto - the co-founders of the financial technology company Ripple Labs - created XRP in 2012. The three founders used XRP to fund Ripple's expansion, making Ripple the largest holder of XRP but, in reality, not controlling its open-source Ledger.

The entire supply of 100 billion XRP tokens was mined before launch, and Ripple has locked more than half of its tokens in escrow accounts. Ripple periodically releases those tokens to stabilize liquidity.

However, XRP cannot be actively mined like Bitcoin (CRYPTO: BTC) or other proof-of-work (PoW) tokens and does not support smart contracts for developing decentralized applications (dApps) like Ethereum (CRYPTO: ETH) and other proof-of-stake (PoS) blockchains.

Ripple initially promoted the use of its XCurrent network as a cheaper, faster, and safer alternative to the widely used SWIFT (Society for Worldwide Interbank Financial Telecommunication) protocol for transferring money. Some smaller financial institutions - including Travelex Bank, Tranglo, and Sentbe - have adopted XCurrent for their money transfer transactions.

Ripple may hope that some of those customers will adopt XRP as an alternative to fiat currency for their cross-border transactions. However, its volatility, regulatory challenges, and conservative banking strategy have limited its appeal.

Ripple has sold about $1.3 billion worth of XRP tokens in a series of coin offerings, but the U.S. Securities and Exchange Commission (SEC) sued the company in 2020, accusing it of selling unregistered securities illegally.

That lawsuit caused Ripple to lose some top clients. Several cryptocurrency exchanges also delisted XRP, and cryptocurrency asset management firm Grayscale suspended its XRP Trust. These obstacles made XRP a difficult cryptocurrency to love. But last August, its battle with the SEC ended with a lower-than-expected penalty. Subsequent efforts by the SEC to pursue its lawsuit failed, and the two parties reached a final settlement earlier this month.

After regulators stepped back, major cryptocurrency exchanges have relisted XRP, Grayscale has relaunched its XRP Trust as a closed-end fund (CEF) for accredited investors, and several cryptocurrency companies have applied for new XRP spot exchange-traded funds (ETFs). Decreased interest rates and the rise of the cryptocurrency-friendly Trump administration have attracted even more investors.

What Are XRP's Short-Term Catalysts?

The biggest short-term obstacles for XRP are fading, but it also has a few potential catalysts in the future. The approval of the first spot ETFs could confirm the existence of XRP and stabilize its price by attracting more mainstream and institutional investors.

There are also persistent rumors about Ripple's initial public offering (IPO). If Ripple does go public, this could generate more buzz for XRP and new capital to expand the XRP Ledger.

To expand its reach, Ripple plans to upgrade its on-demand liquidity (ODL) feature, allowing users to use XRP directly for cross-border transactions across Africa, Latin America, and the Middle East. This expansion could attract new partnerships with more banks and money transfer companies.

To attract more developers, the company plans to add more hooks (small code snippets to enable smart contract features) to the XRP Ledger. The company may also integrate more sidechains (independent blockchains) to incorporate features of the Ethereum Virtual Machine (EVM), decentralized finance (DeFi) protocols, dApps, and non-fungible tokens (NFTs) into its ecosystem.

So is XRP still worth buying?

XRP's biggest hurdle is the SEC's protracted lawsuit. But now that that lawsuit has finally ended, its long-term future seems somewhat unclear. It cannot be actively mined, its blockchain cannot be used to develop dApps, and most financial institutions are reluctant to adopt XRP transfers.

In other words, XRP is likely to struggle to surpass Bitcoin or Ethereum in the long run. Essentially, it is deflationary, but its limited appeal to developers and financial institutions makes it a risky investment. It might be worth a try if you expect XRP ETFs or Ripple's IPO to hit the market, but investors shouldn’t expect to repeat its massive growth over the past 12 months.