XRP's (XRP 2.78%) surge of more than 300% since the summer of 2024 has reignited dreams of crypto riches for many investors. Social media is flooded with predictions of price gains that would turn relatively modest investments into life-changing wealth.
It's an intoxicating idea. But before you bet your financial future on XRP, there's a sobering reality you need to consider about how banks actually use -- or don't use -- the cryptocurrency.
CRYPTO: XRP
Key Data Points
XRP provides legitimate utility
In a market filled with meme coins and outright scams, XRP stands out as a legitimate project with proven utility. Created by Ripple, the coin is designed to enable faster, cheaper transactions between financial institutions, especially across borders. Ripple has partnerships with major institutions like Bank of America -- clear evidence that the underlying technology works and is secure.
The problem isn't XRP's legitimacy or utility. It's that the core investment thesis -- that banking adoption will drive XRP demand -- fundamentally misunderstands how banks use Ripple's products.
The critical distinction XRP investors miss
Until recently, Ripple offered two primary products: RippleNet and On-Demand Liquidity (ODL). Ripple recently rebranded these, folding them into features of a single unified product dubbed "Ripple Payments," but their essence remains unchanged. I'll continue to use the legacy names for clarity.
RippleNet is essentially a messaging service that lets banks settle transactions faster and more cheaply than legacy systems. While banks can use XRP within RippleNet, almost none do. Instead, they leverage Ripple's messaging technology with fiat currencies. Major banks, like the household names driving headlines, use RippleNet without touching XRP at all.
ODL, on the other hand, actually makes direct use of XRP. Used primarily to send funds across borders, ODL uses XRP as a bridge asset -- a go-between currency that makes converting foreign currencies much faster and cheaper. When a U.S. bank sends funds to a French bank, the dollars are converted into XRP, then into euros.
The common bull argument then is that as more institutions adopt ODL, XRP demand will grow as the crypto is used to facilitate these transactions.
Image source: Getty Images.
This theory doesn't really hold up, however. Most banks, especially the major ones, don't have a need for ODL. It's more useful for smaller institutions facing liquidity hurdles, like fintechs focused on international remittances. That makes it a relatively niche product compared to RippleNet and greatly limits its ability to grow in transaction volume.
And even for the institutions that do use ODL, the funds are quickly converted in and out of XRP. Each buy order is immediately matched with an equal sell order, and the institutions on either end don't want their funds tied up any longer than possible in a relatively volatile cryptocurrency that is subject to substantial price swings at any moment.
Rising competition from stablecoins
And it's possible that even this somewhat limited effect could be undermined. Ripple's own push into stablecoins could mean XRP is replaced as the preferred bridge asset within ODL transactions. I think this is exactly where we are headed.
After Ripple's $200 million acquisition of a major stablecoin payment facilitator last year, the now combined Ripple Payments has a third major feature -- essentially ODL with its stablecoin, RLUSD, used as the bridge asset. The main payments page on Ripple's website features a large banner that reads "integrate stablecoin payments into your business." I think it is clear Ripple sees RLUSD as a major opportunity and a core focus of its business as it expands.
So, Is XRP a Millionaire Maker?
The honest answer: no -- at least not in any meaningful sense.
XRP could certainly see significant appreciation in the next year or so, but not the kind of growth you would need to make it a true millionaire-maker. That kind of growth at this point is just not realistic.
But even if more modest growth is possible in the short term, I think XRP's price will fall over the long term. The hype that has driven XRP to its current levels can't sustain itself as investors come to see that the primary bull thesis is shaky at best.
