It's hard to predict the future -- especially in the roller coaster ride of cryptocurrency investing. But with prices up by a jaw-dropping 473% over the last 12 months, many investors might wonder if the Ripple network's native token XRP (XRP +4.65%) can continue its run to $5 in 2025.
With a current price of $3.07, an additional gain of 63% looks very doable for an asset with so many near-term tailwinds. Let's explore three reasons XRP looks likely to pull it off.
XRP is breaking into the mainstream
Many see cryptocurrency as a speculative asset class with dubious fundamental value. However, over time, several respected blockchain networks (with Bitcoin being the best example) have shed that stigma and begun generating reliable long-term gains.
While still volatile, Bitcoin's price chart has continuously moved up and to the right -- consistently beating its previous all-time highs.
Bitcoin Price data by YCharts.
Bitcoin's increasingly predictable performance might have something to do with growing institutional ownership. According to a report by Morningstar, large investors now own 90.5% of Bitcoin in circulation. This can be beneficial because these organizations are typically more diversified and less likely to panic sell during bear markets. XRP could be on the cusp of a similar boom in institutional adoption through securitization.
Monica Long, the president of Ripple Labs (the developer behind XRP), believes an XRP-based exchange-traded fund (ETF) could arrive "very soon." Several companies, including asset management firm Bitwise, have filed S-1 forms with the Securities and Exchange Commission (SEC) requesting approval to create XRP-linked ETFs.
No approval decision has been made yet. However, if successful, XRP would be the third cryptocurrency (after Bitcoin and Ethereum) to have an ETF, which could lead to a surge of institutional ownership and help stabilize long-term performance.
Regulatory overhangs could soon clear up
The eventual resolution of Ripple Labs' legal challenges could also be a long-term tailwind for XRP. In 2023, the developers won a partial victory when a federal judge ruled that XRP sales to retail investors were not securities (in contrast to institutional sales). In January, the SEC appealed this decision.
However, Ripple's leadership remains optimistic, with CEO Brad Garlinghouse calling the appeal "a rehash of already failed arguments -- and likely to be abandoned by the next administration."
Garlinghouse may have a strong point. The SEC's new acting leader, Mark Uyeda, has historically advocated for a business-friendly approach to cryptocurrency regulation. In January, the organization announced the formation of a new crypto task force aiming to develop a comprehensive and clear regulatory framework for crypto assets that could help codify a softer SEC stance over the long term.
Image source: Getty Images.
Ripple has the potential for real-world utility
Perhaps the most important catalyst for Ripple's increasing adoption is its utility-focused design. Unlike Bitcoin, which aims to be a store of value, or Ethereum, which functions as a platform for decentralized applications (dApps), XRP is designed as a bridge currency for international payments.
It fulfills its function with a faster transaction speed of three to five seconds, compared to around 36 minutes for Bitcoin. The platform also charges remarkably low fees: Just 0.00001 XRP per transaction, which is a fraction of a cent. These characteristics could help it become a viable alternative to traditional money transfer techniques like bank wires, which can cost over $40 to send money internationally.
Ripple has partnered with over 100 financial institutions, including TransferGo and the Canadian Imperial Bank of Commerce, which are experimenting with its liquidity solutions. The possible resolution of Ripple's regulatory uncertainties could lead to more widespread adoption.
