The XRP (XRP 10.00%) cryptocurrency was created by a company called Ripple in 2012. It was designed to standardize cross-border payments within the Ripple Payments network, which means it has a tangible real-world use case, unlike most cryptocurrencies.
XRP soared by 235% in 2024, largely on the back of President Donald Trump’s election win. He promised to make America the crypto capital of the world and create a friendlier regulatory environment, paving the way for significant potential value creation across the industry.
But the gains in XRP have since faded. It’s currently down more than 40% from its 52-week high, and it broke below $2 last week shortly after Trump announced sweeping tariffs on America’s trading partners, which turned investor sentiment sharply negative toward all risk assets. Since digital goods and services aren’t subjected to tariffs (as things stand today), should investors buy the dip on XRP, or is this a sign of worse things to come?
Image source: Getty Images.
Ripple created an innovative payments network
It can take several days to settle transactions between banks in different countries, because not all of them use the same payment infrastructure. For example, some use the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network, whereas others don’t. As a result, intermediaries are often needed, which creates settlement delays.
Ripple Payments is designed to connect banks with one another regardless of what infrastructure they use, eliminating the need for intermediaries and letting them settle cross-border transactions almost instantly. XRP standardizes those transactions — for example, a Japanese bank might send XRP to a Korean bank instead of sending Japanese Yen, bypassing foreign exchange fees and other costs in the process (each transaction costs just 0.00001 XRP, or a tiny fraction of one cent).
As a result, XRP has a legitimate use case that could theoretically support its value over the long term.
Less regulation is a tailwind for Ripple
Back in 2020, the U.S. Securities and Exchange Commission (SEC) sued Ripple for the way it distributed XRP tokens. Since Ripple controls about 42 billion tokens out of the 100 billion in total supply, and releases them gradually to meet demand, the agency claimed XRP should be classified as a financial security like a stock or a bond.
Had the SEC won the lawsuit, it would have changed the way Ripple did business by forcing the company to operate under a strict set of rules and regulations. But in August 2024, a judge ruled that XRP might only be a security in some circumstances, like when it’s issued to institutional investors, but not when it’s used in transactions or traded on crypto exchanges. Ripple was hit with a fine of $125 million, but this outcome was mostly viewed as a win.
The SEC proceeded to appeal the verdict, which threatened to tie the parties up in court yet again. That’s why XRP investors viewed Trump’s election win so positively — they felt the SEC would be less hostile to the crypto industry overall on his watch, and it turns out they were right. Under Trump’s acting SEC chairman, Mark Uyeda, the agency agreed to a settlement with Ripple, which included a reduced fine of $50 million.
The SEC has also paused or withdrawn active lawsuits against crypto giants like Binance and Coinbase Global recently, further highlighting the enormous shift in the way the regulator views the industry.
Future upside in XRP could be limited
Even though XRP can save banks quite a bit of money on transaction costs, they don’t actually need to use it. They can still benefit from instant settlements through Ripple Payments even if they use fiat currencies. In other words, the success of the payments network won’t necessarily translate into higher prices for XRP.
That might be why XRP failed to surpass its all-time high from 2018 during its post-election rally last year. Despite a softer regulatory environment clearly benefiting Ripple, it appears XRP’s price movements are mostly determined by speculative investors.
As I mentioned at the top, XRP is currently down more than 40% from its recent 52-week high. After its last major rally in 2018, which culminated in its record-high price of $3.40, the token declined by more than 90%. That same outcome might be in motion right now, so I wouldn’t buy XRP here.
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