The cryptocurrency market is on a tear this year. The total value of all tokens and coins in circulation recently hit an all-time high of $3.8 trillion, marking a significant gain from its bear market low point of $823 billion in 2022.
XRP (XRP -9.54%) is the token created by fintech company Ripple in 2012, and it’s up by 325% year to date. It now has a market capitalization of $146 billion, making it the third-largest cryptocurrency in the world behind Bitcoin and Ethereum.
A number of tailwinds might drive XRP to new heights in 2025. Could it soar to $5 from its current price of $2.55?
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Ripple built an innovative payments network
It can take several days for banks to send money to other banks overseas using regular wire transfers, because they sometimes use different infrastructure (some use the SWIFT network, whereas others don’t). That means intermediary banks need to get involved to act as middlemen for each transaction, which creates delays.
Ripple designed the Ripple Payments network (formerly RippleNet) to streamline that process. Its technology works with all existing bank infrastructure to standardize payment protocols.
For example, it allows banks in the SWIFT network to “talk” to other banks that aren’t using SWIFT. That means banks can settle transactions with each other directly, so transfers via Ripple Payments are basically instant.
The XRP cryptocurrency, which Ripple controls, helps standardize those transactions. For example, an American bank might send XRP to an Italian bank rather than sending American dollars because it would bypass currency exchange fees and other transaction costs. The banks on either side of the transaction can handle their own conversions between XRP and their desired fiat currency.
Therefore, while speculation is a big driver of the price per XRP token, there is a source of real demand from financial institutions using it to process transactions.
XRP could benefit from a lighter regulatory environment in 2025
The U.S. Securities and Exchange Commission (SEC) slapped Ripple with a lawsuit in 2020, alleging that the XRP token is a financial security (like a stock or a bond). Companies that issue securities must register them and operate under a strict regulatory framework, which meant Ripple’s operations would be materially restricted if the SEC won.
Ripple argued that XRP was a commodity rather than a security, which would place it under less regulatory scrutiny. But here’s the problem: Around 57 billion XRP tokens are currently circulating, but there is a fixed supply of 100 billion tokens. Ripple controls the other 43 billion tokens, and it can release up to 1 billion per month to meet demand. It basically controls supply, so I understand the SEC’s perspective.
A cryptocurrency like Bitcoin, for example, doesn’t have this problem because it isn’t controlled, backed, or issued by any company or individual.
In August 2024, the judge ruled that XRP might be a security only in specific circumstances, like when a new supply is issued to institutional investors, but not when it’s traded on crypto exchanges or used in transactions. Ripple was ordered to pay a fine of $125 million, and the news was positively received by investors even though the SEC is appealing the decision.
But the shifting political climate following the 2024 U.S. presidential election could change everything. Current SEC Chair Gary Gensler has announced his intent to resign from the commission on Jan. 20, and with the nomination of a pro-crypto businessman to take Gensler’s place, XRP investors are already hopeful that federal government policy on the issue could see a massive shift.
XRP could hit $5 in 2025
Banks don’t have to use XRP in order to use the Ripple Payments network because it’s also compatible with fiat currencies. That means the value of XRP isn’t necessarily tied to the success of Ripple Payments.
As a result, the price of XRP often swings based on the whims of speculators who buy it in the hope it will move higher. Despite its 325% gain in 2024, it still hasn’t reclaimed its all-time high of $3.40 from 2018.
But if there’s one thing we learned in 2021 when meme tokens like Dogecoin and Shiba Inu skyrocketed, it’s to never underestimate the power of a speculative frenzy. There isn’t really a fundamental reason for XRP to double from here and reach $5, but it’s possible investors start pricing in Ripple’s potential under a lighter regulatory regime — even if it isn’t guaranteed to drive demand for XRP.
At $5 per token, XRP would have a market cap of around $290 billion, which is still a fraction of Bitcoin’s $2 trillion market cap. Bitcoin is the world’s largest cryptocurrency, but it doesn’t really have a solid use case. Many investors consider it to be a form of digital gold, but it isn’t widely used as a payment mechanism by consumers or businesses.
That means Bitcoin is also a speculative asset. Most investors buy it hoping for higher prices in the future, which is the same reason they buy XRP.
Therefore, investors should keep one thing in mind: Even if XRP does reach $5 in 2025, it won’t necessarily stay there. After peaking at $3.40 in 2018, it plunged by 96% to just $0.13 in 2020, and there’s no reason that can’t happen again if its current surge fizzles out.
