The beginning of President Donald Trump's second term has signaled a more relaxed regulatory environment for cryptocurrencies. Trump has already ordered the establishment of a strategic government reserve for Bitcoin and a stockpile for other digital assets.
XRP (Ripple) (XRP -4.58%) is also a potential winner. Federal regulators recently dropped their appeal against XRP's developer, Ripple Labs, after the courts ruled mostly favorably for Ripple Labs in a lawsuit that started in 2020.
Now, XRP faces its most straightforward path to broader adoption in recent memory. What does that mean for the crypto's price?
I think XRP could reach new all-time highs, pushing to the $4 mark during the next three years. That's nearly 100% upside from today's price of $2.15. I'll explain why.
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The XRP ledger could play a role in a digital economy facing deregulation
Currently, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a secure global messaging network for banks, is the primary instrument for cross-border monetary transfers. The average SWIFT transaction takes about 18 hours and incurs fees of up to $50.
Ripple Labs created the XRP ledger, a blockchain network for banks, governments, and enterprises to facilitate cross-border transactions efficiently. The XRP ledger uses XRP as its native token. Essentially, currency is converted to XRP, transferred on the XRP ledger, then converted to another currency on the other end. The XRP ledger can settle a transaction in seconds and charges no transfer fees.
While regulations can protect businesses and consumers, too much regulation can hinder innovation and growth. Trump has a long history of supporting deregulation, and now that the Securities and Exchange Commission's lawsuit is over, the XRP Ledger's capabilities could finally enable it to gain traction over the next several years.
Institutional support could be coming
Investor support for cryptocurrencies remains strong, and institutions are following suit. Cryptocurrency ETFs are emerging, with several already launched for some of the largest cryptocurrencies, including Bitcoin and Ethereum.
XRP is currently the world's fourth-largest cryptocurrency, with a $126 billion market cap. It would make sense to offer an XRP ETF, but the long-standing litigation had essentially made it untouchable. With the lawsuit now over, institutions seem more likely to invest in XRP.
Polymarket, a leading digital odds maker, currently indicates a 90% chance that an XRP ETF is approved this year. Not only would institutional support boost demand for XRP, but it would also help legitimize it, thereby increasing its likelihood of adoption for cross-border transactions.
XRP remains risky, so invest cautiously
The global financial system has primarily operated in the same way for decades, with trillions of dollars of value constantly flowing through it. The idea of a digital global economy built on blockchains is exciting, but it isn't guaranteed and will likely take years to make a notable impact.
Therefore, XRP will remain a speculative investment for the foreseeable future. Even when XRP spiked to its recent high of $3.39, it didn't last long.
If you do invest in XRP, don't look to make a quick profit. This is a situation where investors would likely do better to buy and hold it as a minor component of a diversified portfolio.
That said, if regulatory stars continue to align for XRP and the broader cryptocurrency space, I don't see why XRP can't have an exciting future ahead.
