The cryptocurrency market is on a tear this year. The total value of all tokens and coins in circulation recently hit an all-time high of $3.8 trillion, marking a significant gain from its bear market low point of $823 billion in 2022.
XRP (CRYPTO: XRP) is the token created by fintech company Ripple in 2012, and it's up by 325% year to date. It now has a market capitalization of $146 billion, making it the third-largest cryptocurrency in the world behind Bitcoin and Ethereum.
A number of tailwinds might drive XRP to new heights in 2025. Could it soar to $5 from its current price of $2.55?
It can take several days for banks to send money to other banks overseas using regular wire transfers, because they sometimes use different infrastructure (some use the SWIFT network, whereas others don't). That means intermediary banks need to get involved to act as middlemen for each transaction, which creates delays.
Ripple designed the Ripple Payments network (formerly RippleNet) to streamline that process. Its technology works with all existing bank infrastructure to standardize payment protocols.
For example, it allows banks in the SWIFT network to "talk" to other banks that aren't using SWIFT. That means banks can settle transactions with each other directly, so transfers via Ripple Payments are basically instant.
The XRP cryptocurrency, which Ripple controls, helps standardize those transactions. For example, an American bank might send XRP to an Italian bank rather than sending American dollars because it would bypass currency exchange fees and other transaction costs. The banks on either side of the transaction can handle their own conversions between XRP and their desired fiat currency.
Therefore, while speculation is a big driver of the price per XRP token, there is a source of real demand from financial institutions using it to process transactions.
The U.S. Securities and Exchange Commission (SEC) slapped Ripple with a lawsuit in 2020, alleging that the XRP token is a financial security (like a stock or a bond). Companies that issue securities must register them and operate under a strict regulatory framework, which meant Ripple's operations would be materially restricted if the SEC won.
Ripple argued that XRP was a commodity rather than a security, which would place it under less regulatory scrutiny. But here's the problem: Around 57 billion XRP tokens are currently circulating, but there is a fixed supply of 100 billion tokens. Ripple controls the other 43 billion tokens, and it can release up to 1 billion per month to meet demand. It basically controls supply, so I understand the SEC's perspective.