XRP has fluctuated between a low of $0.39 and a high of $3.40 over the past 52 weeks. A year ago, XRP was still facing an uncertain future as protracted legal battles with the SEC continued. However, buyers quickly returned as most of those regulatory hurdles faded by the end of 2024. Lower interest rates and President Donald Trump's crypto-friendly stance pushed its price even higher.
XRP then dropped back and is currently trading at around $2.20 per token, still down 40% from its all-time high of $3.84 in January 2018. Should investors continue to buy XRP right now and expect it to soar to a new record high above $4? Let's revisit the short-term catalysts for this token to make a decision.
Why is the SEC Pursuing Ripple?
XRP was created in 2012 by the founders of Ripple Labs, a fintech company that promotes its blockchain as a cheaper, faster, and safer alternative to the SWIFT (Society for Worldwide Interbank Financial Telecommunication) protocol for transferring money. Ripple has used XRP as a bridge currency for some of its transactions.
The founders of Ripple mined the entire supply of 100 billion XRP tokens before launch, allocating 80 billion tokens to the company and the remaining 20 billion tokens to themselves. Ripple then periodically sold its own XRP tokens to fund the company's expansion.
That fundraising strategy attracted the SEC's attention, which sued Ripple in 2020, arguing that Ripple was selling unlicensed securities through its XRP services. That lawsuit led to XRP being delisted from major cryptocurrency exchanges, and Ripple lost some of its top customers.
What Happened After the SEC Backed Down?
In July 2023, a court ruled that XRP cannot be considered an unregistered security. That ruling did not end the SEC lawsuit, but it did prompt major cryptocurrency exchanges to relist XRP.
Last August, the SEC lawsuit ended with a lighter-than-expected penalty for Ripple. The SEC appealed that ruling, but recent rumors suggest they may completely withdraw that appeal. The resolution of that lawsuit has driven most of XRP's gains over the past year.
Grayscale, the company that initially closed the XRP Trust in 2020 in response to the SEC lawsuit, has also reintroduced it as a closed-end fund (CEF) for accredited investors last September. Several other cryptocurrency companies have also filed for new XRP ETFs.
What is the Next Major Catalyst for XRP?
Many of Ripple's legal barriers have melted away over the past year, but the SEC needs to officially drop its appeal and formally declare that XRP is not a security. That clarity could encourage more financial institutions to adopt XRP as a bridge currency for their transactions. Ripple recently applied for a U.S. banking license.
If that charter is approved, Ripple could use XRP as a liquidity bridge for more fiat transactions for high remittance markets like India, Brazil, and the Philippines. Ripple has also initiated pilot programs with some central banks to use XRP as a liquidity bridge between their national central bank digital currencies.
If many banks and fintech companies adopt XRP as a liquidity bridge, its price will stabilize. If the SEC eventually approves the first XRP ETFs, those funds could attract more retail and institutional investors, further pushing its price higher.
XRP cannot really be measured by its scarcity like Bitcoin since it cannot be mined. It also cannot be valued by the scale of its developer ecosystem, as it does not support smart contracts like Ethereum and other proof-of-stake (PoS) blockchains.
However, XRP developers have added support for lightweight smart contracts (primarily for payments) to its ledger through 'hooks' and application programming interfaces (APIs). They have also proposed developing sidechains that could support Ethereum-based smart contracts. These initial steps show that the XRP Ledger could ultimately support more decentralized applications (dApps) in the future.
But Will the Price Ever Rise to $4 or More?
XRP's price may stabilize as these favorable winds appear, but most of its short-term price targets hover around $3 instead of $4. That's because it may take a lot of capital to push its price higher. With a market capitalization of $134 billion, a 75% increase to $4 would bring its valuation to $235 billion, making it comparable to Ether, which has a market cap of $312 billion.
Technically, XRP is a deflationary token, as new tokens cannot be minted, and it burns (removes from circulation) a small amount with each transaction. However, there are still 59 billion coins in circulation, and that abundant supply could limit its price appreciation potential unless some major investors jump in.
The potential for XRP's price to drop may be limited at these levels, but I won't rush to buy it right now. Its price will likely remain below $4 for a long time, and it may struggle to gain momentum unless all the aforementioned catalysts take effect. So, for now, I want to stick with Bitcoin or Ether instead of XRP.
