The XRP Ledger is a unique blockchain network created by financial technology company Ripple. Banks and financial institutions can use the XRP (XRP +0.88%) cryptocurrency to send money around the world via the XRP Ledger, resulting in instant, low-cost transactions.
Ripple just upgraded the XRP Ledger's base software, introducing bug fixes and also reducing memory consumption by as much as 40%. The update -- coded as 3.2.0 -- will make the XRP network even faster and cheaper for processing payments.
However, it won't necessarily lead to a recovery in XRP, which has lost 67% of its peak value since last July and now trades at just $1.25 per token. The software update simply can't fix some of the structural headwinds facing the cryptocurrency.
Here's why it may well fall below $1.
Image source: Getty Images.
The XRP token might be losing traction
The global banking system is fragmented. Not every financial institution uses the same payment infrastructure, so they often need intermediaries to help them settle cross-border transactions, which adds costs and slows the process. Ripple's payment network sits on top of existing infrastructure, allowing banks to settle transactions with one another directly and, therefore, instantly.
Banks can use XRP to standardize each transaction. For example, a U.S. bank can send XRP to a Japanese bank instead of U.S. dollars, thereby eliminating costly foreign-exchange fees. Such a transaction can cost as little as 0.00001 XRP tokens, or a fraction of one U.S. cent.
The XRP Ledger comes into play when banks use XRP in transactions -- but they don't have to. Banks can still benefit from instant transfers if they send fiat currency or even stablecoins through Ripple's commercial payment network, Ripple Payments, which means the company's success won't necessarily result in higher demand (or value) for XRP.
XRP is highly volatile, so banks can be exposed to potential losses even if they hold it for a brief period, which is a legitimate reason they might avoid it. Ripple launched its own stablecoin, Ripple USD (RLUSD +0.01%), in late 2024, which may be more suitable for certain U.S. dollar-based transactions because it maintains a constant value with zero volatility.
Ripple USD runs on the XRP Ledger, so fees are still payable in XRP. That means every Ripple USD transaction creates a tiny amount of demand for XRP, although it probably isn't enough to drive sustainable upside over the long term. However, it does mean the token will retain some relevance even if it is abandoned entirely as a bridge currency.
CRYPTO: XRP
Key Data Points
History suggests XRP could sink below $1
Since banks don't have to use XRP, the cryptocurrency lacks a reliable source of demand capable of creating long-term value. As a result, speculative investors have significant influence over its performance, which isn't a recipe for sustainable upside. That is a key reason the token has plummeted by 67% from last year's record high.
This isn't the first time XRP has suffered a sharp decline. It crashed by more than 90% shortly after setting its previous all-time high in 2018 and eventually bottomed out at about $0.14 per token in 2020. It remained below $1 for the majority of the next four years, until Donald Trump's presidential election win in November 2024 sparked a buying frenzy across the entire crypto sector.
I would argue the fundamental picture hasn't changed all that much during the past eight years or so, which means the current decline in XRP could extend to a similar level. The token would have to fall by a further 89% from its current price to hit $0.14 again, which I think is the path of least resistance right now.
In summary, the recent XRP Ledger upgrade might make the network faster and more efficient, but it doesn't address some of the reasons banks might avoid using XRP, such as its volatility and the availability of more suitable alternatives, like stablecoins.
