Cryptocurrencies are often polarizing. True believers often dismiss any legitimate skepticism of a digital token and its blockchain, while financial traditionalists often can't imagine that any new financial process could take root in an established system.
No matter where you fall on this spectrum, one coin that has gained significant attention lately is XRP (Ripple) (XRP -5.14%). The real-world benefit of XRP is that its blockchain allows for faster cross-border transactions. Sending money across the globe and converting it into another currency traditionally takes nearly a day and can be expensive, but XRP can do it in seconds and doesn't charge transaction fees.
With this practical application in mind, here are two reasons to be optimistic about XRP over the next year and one word of caution.
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1. The SEC has settled its case with Ripple
The U.S. Securities and Exchange Commission (SEC) formerly had a lawsuit against Ripple Labs (the developer of XRP), saying the company was selling an unregulated security. But that lawsuit was settled last month, resulting in Ripple paying a $50 million fine but receiving the remainder of $125 million that was being held by the SEC.
The settlement is significant for XRP because some financial institutions were likely hesitant to adopt XRP's cross-border transaction blockchain process while the U.S. government had a pending lawsuit against the coin's developer.
There's no guarantee that XRP will gain widespread adoption over the next year, or ever, but with the lawsuit out of the way, it's far more likely than before that institutions could move in this direction.
2. An XRP ETF could emerge
Exchange-traded funds have become a popular option for buying stocks, and they've recently emerged as a new avenue for investing in crypto as well. About a dozen Bitcoin ETFs launched last year, and other cryptocurrency ETFs have also debuted, proving demand for crypto ETFs is strong.
The digital prediction market Polymarket has the odds of an XRP ETF launching this year at 98%, up from 68% in April.
XRP is already the fourth-largest cryptocurrency, and demand for Bitcoin and Ethereum ETFs has been strong since they debuted. For example, BlackRock's iShares Bitcoin Trust ETF has received nearly $49 billion in net inflows since it launched in 2024.
Some analysts estimate that XRP's value would skyrocket to $27 -- a more than 1,000% increase from its current price -- if an XRP ETF launches this year. That astronomical price increase prediction is a reminder of the unrealistic euphoria that's often associated with cryptocurrencies, but it's also an indicator that investors may be eager to buy XRP if there's an easy way to do so.
Again, there's no guarantee of an XRP ETF debut, or that it would cause a spike in XRP's price, but considering that XRP's price has soared 365% over the past year, it's clear that investors are already interested in the coin.
Keep this in mind before buying XRP
While there are a handful of legitimate reasons to be optimistic about XRP, it's also important to note that the crypto's value can be volatile. All digital tokens come with a hefty dose of instability, and XRP is no exception.
For example, the same analysts who predict XRP could gain 1,000% if an ETF is approved also predict that its value could then fall by up to 90% after the surge.
Still, the real-world application of using XRP's blockchain to process cross-border transactions makes the token an interesting investment idea. If you're OK with volatility, then having a small position in XRP may not be a bad idea. But it's important to remember that crypto should play a limited role in your overall investment strategy.
