XRP (XRP +0.24%) was created by a company called Ripple. The cryptocurrency is designed to standardize transactions within the Ripple Payments network, which makes it faster and more affordable for banks to send money across borders. But more on that later.
XRP was one of the best-performing cryptocurrencies last year, soaring by a whopping 235%. It has carried much of that momentum into 2025 with a further gain of 35% so far, and it recently set a new all-time high of $3.84, finally breaking its previous record from 2018.
The crypto industry has the wind at its back thanks to a drastic shift in the U.S. regulatory environment, and a series of friendly policies from President Donald Trump's administration. But something very unexpected happened the last time XRP hit a new record high, and it could be a sign of what's coming next.
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XRP is an innovative solution to a real banking problem
Not all banks use the same payment infrastructure, which is why sending money overseas can take several days. In the context of a transaction, if one bank uses the popular SWIFT (Society for Worldwide Interbank Financial Telecommunication) network but the other bank doesn't, an intermediary is required to help settle the transfer. This adds time and further costs.
Ripple's Ripple Payments network is designed to facilitate direct settlements between global banks no matter what existing infrastructure is already in place, which means transfers are practically instantaneous.
XRP is the bridge currency for the network. For example, an American bank can send XRP to a Japanese bank instead of sending U.S. dollars, which cuts out expensive foreign exchange fees. Once the Japanese bank receives XRP, it can simply convert it into its domestic currency (the yen). The fee for executing the transaction using XRP would cost just 0.00001 tokens, or a fraction of one U.S. cent.
Following trials with a number of banks, XRP started gathering momentum which led to speculation of a listing on the popular crypto exchange Coinbase in early 2018. The confluence of factors sent the token soaring to a record high of $3.45 in January that year, but when the listing didn't immediately happen, the token's value started falling -- and its sketchy liquidity at the time fueled a collapse of more than 90% in the months that followed.
Regulatory issues plagued XRP for years
XRP has a total supply of 100 billion tokens. About 59 billion are in circulation, while Ripple holds the other 41 billion and steadily releases them to meet demand. This makes XRP very different from other cryptocurrencies like Bitcoin (BTC +0.60%), which are earned through a process called mining.
Because Ripple is the sole issuer of XRP, the U.S. Securities and Exchange Commission (SEC) sued the company in 2020 alleging it breached securities laws. The agency argued XRP should be classified as a regulated financial security, because it's issued in the same way as stocks and bonds. The case could have upended Ripple's business model, which is why the price of XRP remained mostly dormant for years.
CRYPTO: XRP
Key Data Points
In August 2024, a judge ruled that XRP might only be a financial security in some circumstances, such as when it's issued to institutions, but not when it's used in transactions or traded on crypto exchanges. Ripple was hit with a fine of $125 million, but investors mostly viewed the outcome as a win. The SEC initially appealed the decision, which threatened to tie the matter up in court for several more years -- but then Trump took office.
The president appointed crypto advocate Paul Atkins to run the SEC earlier this year, and the agency has now paused, settled, or withdrawn several of the cases it initiated under the past administration. The agency reached a settlement agreement with Ripple and said it will withdraw its appeal of last year's court decision, but a judge still has to sign off before the case is formally closed.
Most of the rally in XRP since last November can be attributed to the anticipated resolution of Ripple's regulatory woes, but a different tailwind pushed the token to a new record high. The New York Stock Exchange, alongside the SEC, approved a new leveraged XRP exchange-traded fund (ETF) called the ProShares Ultra XRP ETF.
The fund holds futures contracts so it doesn't buy XRP directly, but it could pave the way for the approval of a spot XRP ETF, the same way futures-based Bitcoin ETFs preceded the official approval of spot Bitcoin ETFs. SEC approval of spot XRP ETFs would likely trigger a wave of new demand for the coins.
XRP's unexpected collapse in 2018 could be a sign of what's coming
Despite XRP's current momentum, there's a risk of another crash of 90% (or more) following its recent all-time high, because there might not be enough substance behind some of its tailwinds to support further upside.
For example, banks don't have to use XRP to benefit from instant cross-border transactions through Ripple Payments, because the network also supports the use of fiat currencies. Therefore, the success of the network might not result in a higher price for XRP over the long term.
Further, Bitcoin has benefited from the launch of ETFs because the cryptocurrency was already viewed as a legitimate store of value, thanks to its decentralized nature and its capped supply. XRP doesn't share those attributes because it's controlled and issued by Ripple, so problems at the company can influence its value -- the SEC's lawsuit being a prime example.
XRP has already declined by 19% (as of July 29) from its latest record high, and with its fundamentals on shaky foundations, a further slide might be in the cards. In fact, it's possible investors who were around during its 2018 collapse might start to feel a sense of déjà vu in the near future.
