XRP Crypto Investment Analysis: Speculative Gamble or the Future of Finance?
XRP seems like mostly overhyped junk...
One of the most hyped cryptocurrencies in recent months is XRP.
Why? It’s up 393.86% in the past 6 months, 293.2% in the past month, and 277.29% YTD. Bitcoin is up 48.17% in the past 6 months - and XRP is crushing it in ROI.
When “price-go-up” magic happens, people pay attention and more speculative investors gamblers FOMO into the upward hype.
Many are so lost they don’t understand what a market cap is (not kidding).
So they’ll see a price like $2 XRP and assume dirt cheap relative to BTC (~$100k) then think “what if XRP also reaches $100k like BTC” (downright comedic).
I just typed XRP into Google Search and the headlines were beyond cracked: XRP to $4.40, XRP to $27, XRP to $18, XRP to $1000, XRP to rally 24,544% according to expert forecasts.
Would I care if XRP rallied like that? No. It would benefit all crypto assets in terms of price appreciation… but it would indicate either: (1) astronomical bubble OR (2) XRP becomes the go-to settlement asset for large financial institutions (odds of this happening likely ~1-2%).
Anyways, I wrote this piece to help people better understand XRP, Ripple Labs, RLUSD, and explain why XRP is likely a bad investment.
That said, XRP may be a reasonable cyclical trade (if you’re into trading), as it is one of the stickiest cryptos wherein it has historically maintained its positioning within the top 10 and has good ROI each bull cycle relative to bear market average.
What is XRP?
XRP is a digital asset (cryptocurrency) that operates on the XRP Ledger (XRPL), a blockchain-like ledger designed for fast and low-cost transfers of value.
It was created in 2012 by David Schwartz, Jed McCaleb, and Arthur Britto, who formed Ripple (originally called OpenCoin, then Ripple Labs) to promote and develop the XRPL and the associated ecosystem.
Characteristics of XRP:
Speed & Cost: XRP transactions settle in 3-5 seconds, often at fractions of a cent per transaction.
Purpose: XRP was initially envisioned as a bridge currency to facilitate cross-border payments and foreign exchange transactions without the need for pre-funded nostro/vostro accounts.
Supply: XRP started with a fixed supply of 100 billion tokens, a large portion of which has been held and released over time by Ripple.
How does XRP differ from Ripple / Ripple Labs?
Ripple Labs (often just “Ripple”) is a private, U.S.-based technology company that develops software products for financial institutions (estimated valuation: ~$5-10B).
Ripple focuses on cross-border payment solutions and improving the efficiency of the global payments infrastructure.
The company’s flagship offerings include RippleNet (a network of financial institutions) and various solutions for messaging, settlement, and liquidity management.
Key Distinctions:
Entity vs. Asset: Ripple Labs is a company; XRP is a digital asset native to the XRP Ledger. They are separate things, although Ripple is the main entity that has historically promoted XRP’s use cases.
Control & Influence: Ripple does not “own” the XRP Ledger in a strict sense —XRPL operates via a consensus mechanism with a set of validators — but Ripple is by far the most influential player in the XRP ecosystem. The company originally held the majority of XRP tokens and released them periodically.
Technology vs. Token: Financial institutions can use Ripple Labs technology (like RippleNet) without actually using XRP tokens. This is a crucial point: adoption of Ripple’s software does not necessarily translate into increased demand for XRP.
Why do People Invest in XRP Crypto?
People invest in XRP for several reasons.
Price Speculation (“Price Go Up”): Many are drawn simply by the hope that XRP’s price will rise over time. They may have seen previous crypto bull runs, press coverage, or social media influencers hyping massive future gains.
Community and Social Factors (XRP Army): XRP has a dedicated fan base—often called the “XRP Army.” This community-driven loyalty can encourage people to buy and hold XRP, sometimes based on sentiment, social media consensus, or charismatic advocates rather than fundamentals.
Belief in Future Utility and Adoption: Some investors truly believe that Ripple’s partnerships with financial institutions and the XRPL’s fast, cheap transactions will eventually lead to widespread use of XRP as a global liquidity and bridging asset. They anticipate that if banks and remittance providers start using XRP at scale (through on-demand liquidity services), the increased demand will drive up the token’s value.
Misinterpretation or Confusion: Others invest because they assume that any mention of “Ripple technology” adoption by banks automatically means they will be using XRP. This is often not the case, but the misunderstanding persists.
History of XRP, Ripple Labs, Brad Garlinghouse
Founding & Early Years (2012-2015): XRP and the XRPL were created in 2012. Ripple Labs was formed around the same time to develop and promote the technology. Early on, Ripple focused on building solutions for cross-border payments and tried to engage banks and payment providers.
Brad Garlinghouse’s Role: Brad Garlinghouse joined Ripple in 2015 and became CEO in 2016. Under his leadership, Ripple aggressively pursued partnerships with financial institutions. Garlinghouse has often publicly promoted XRP’s potential as a bridge currency.
SEC Lawsuit (2020-2023): In December 2020, the U.S. Securities and Exchange Commission (SEC) sued Ripple Labs, Brad Garlinghouse, and Chris Larsen, alleging that XRP sales constituted an unregistered securities offering. The lawsuit caused significant market uncertainty, delistings of XRP on U.S. exchanges, and a depressed price for a time.
Resolution/Partial Victory: In July 2023, a judge ruled that while certain institutional sales of XRP were securities transactions, programmatic sales (such as those on exchanges) were not. This partial win reduced regulatory uncertainty and allowed XRP trading to resume on many U.S. exchanges. The case is not fully concluded at the time of writing, but this ruling was a major positive development for Ripple and XRP.
SEC Target & Outcome: Ripple was targeted likely because the SEC viewed its XRP distributions to fund operations as equivalent to selling securities without registration. The partial court victory hinged on the “Howey test” and the nature of sales. The result gave Ripple some breathing room and signaled that not all XRP transactions might be considered securities offerings. However, this doesn’t fully settle the matter, and appeals or further clarifications may follow.
Ripple, XRP, Trump (2024): Gary Gensler is out, Paul Atkins is in. David Sacks is the Crypto Czar and supports Ripple. It is likely that the SEC case will get dismissed or resolved with some sort of settlement (e.g. $125M which matches the prior penalty).
Is XRP Decentralized Enough to Not Be a Security?
XRP Ledger uses a unique consensus protocol (not proof-of-work or proof-of-stake) with a list of trusted validators (UNL - Unique Node List).
Critics argue this setup is more centralized compared to Bitcoin or Ethereum.
Ripple’s large initial share of XRP also raises questions.
However, the judge’s ruling in 2023 focused more on the nature of how XRP was sold rather than pure decentralization.
While decentralization can influence whether a token is seen as a security, the key legal questions are about investment contracts, expectation of profit derived from others’ efforts, and how the asset is distributed.
The court’s decision indicated that programmatic sales to the public didn’t meet the criteria for a securities offering.
Full decentralization isn’t strictly required for a token not to be deemed a security, but greater decentralization generally helps the argument that the asset is not controlled by one entity.
What is RLUSD & How Does It Compare to XRP?
RLUSD is a stablecoin introduced by Ripple, pegged 1:1 to the U.S. dollar and backed by reserves like cash and short-term Treasuries.
It aims to provide a stable asset on the XRPL that can facilitate liquidity, enable faster fiat on/off ramps, and reduce volatility concerns.
Comparison to XRP:
Use Case: XRP is a bridge asset primarily intended for facilitating cross-border transactions and liquidity. RLUSD is a stablecoin designed to hold a steady value for transacting and holding.
Volatility: XRP’s price fluctuates. RLUSD, being a stablecoin, should remain stable at $1.
Impact on XRP: RLUSD gives institutions a stable, regulated digital dollar to transact on the XRPL. This could make the ledger more attractive, increasing overall usage.
Does RLUSD increase XRP’s value?
RLUSD itself doesn’t guarantee XRP price appreciation.
Banks might use RLUSD for stability rather than holding XRP.
In theory, if RLUSD improves liquidity and ecosystem health, it might indirectly benefit XRP by increasing the XRPL’s utility.
But the direct necessity for XRP in RLUSD usage is not clear—participants can use RLUSD without needing to hold large amounts of XRP.
Who are XRP’s competitors? (Crypto & Non-Crypto)
These are the technologies (tradfi & crypto) that are most likely to see mainstream adoption by major financial institutions in the future.
XRP faces stiff competition from multiple fronts.
Established infrastructures (SWIFT gpi), bank-led stablecoins, regulated public stablecoins, and potentially CBDCs are all more likely to see widespread institutional usage.
Ethereum-based solutions, which are already home to popular stablecoins, also stand a better chance of integration into fintech services used by institutions.
XRP’s competitive edge diminishes as more stable, regulated, and familiar solutions gain traction.
Financial institutions typically opt for what minimizes friction and regulatory risk, which puts non-stable crypto assets like XRP lower on the probability scale.
Categories of Competition
Existing Traditional Networks (Upgraded Systems like SWIFT gpi)
What It Is: SWIFT gpi (Global Payments Innovation) is an enhanced version of the existing SWIFT messaging system, providing faster settlement times, improved transparency, and tracking.
Pros: Already connected to over 11,000 financial institutions worldwide, trusted, well-established compliance frameworks, minimal friction in adoption since it’s an upgrade to a known system.
Cons: Still relies on correspondent banking relationships; improvements are incremental rather than revolutionary.
Likelihood of Widespread Use: Very High (90%). Banks prefer incremental improvements over adopting entirely new crypto assets. SWIFT gpi has already seen significant uptake.
Bank-Issued or Consortium Stablecoins (e.g., JPM Coin, Onyx by J.P. Morgan)
What It Is: Permissioned, bank-issued stablecoins or digital cash equivalents used within closed networks of known participants. JPM Coin, for example, settles transactions between J.P. Morgan clients on Onyx, their proprietary DLT platform.
Pros: Backed by major banking institutions with brand trust, designed from the start for compliance, minimal volatility since they’re pegged 1:1 to fiat.
Cons: Primarily internal solutions; wide external adoption beyond consortium members may be limited.
Likelihood of Widespread Use: High (70%). Large banks trust their own ecosystems. Over time, more banks may join such networks.
Regulated Public Stablecoins (e.g., USDC, RLUSD)
What It Is: Fiat-backed stablecoins issued by regulated entities, with reserves held in reputable institutions. RLUSD, for example, is Ripple’s stablecoin, while USDC is issued by Circle and used widely in crypto markets.
Pros: Stable value, easier for institutions to handle than volatile crypto. Integration into existing payment rails and fintech platforms.
Cons: Regulatory frameworks are still evolving. Some institutions may require more clarity and backing from established financial players.
Likelihood of Widespread Use: Medium-High (65%). Already seeing adoption in fintech and some smaller financial institutions. As regulations solidify, stablecoins could integrate deeply into global finance.
Central Bank Digital Currencies (CBDCs)
What It Is: Digital versions of fiat currency issued directly by central banks.
Pros: Direct, sovereign guarantee. High trust factor if implemented. Could streamline interbank settlements and cross-border payments if widely interoperable.
Cons: Development and rollout have been slow and cautious. Political, privacy, and technical challenges remain.
Likelihood of Widespread Use: Moderate (60%). If large economies issue CBDCs, their adoption in cross-border finance would be strong, though timelines remain uncertain.
Ethereum and Other Major Blockchain Ecosystems (e.g., Ethereum-based Stablecoins)
What They Are: Public blockchains like Ethereum, widely used for tokenization, stablecoins (USDC, USDT), and various DeFi applications.
Pros: Huge developer ecosystem, high liquidity, extensive interoperability. Many crypto-fiat ramps and existing financial experiments.
Cons: Still grappling with scalability, regulatory clarity, and the complexity of public blockchains. Institutions may prefer permissioned or semi-permissioned environments.
Likelihood of Widespread Use: Medium (50%). Financial institutions already experiment with Ethereum-based stablecoins. Adoption could increase if Ethereum’s scalability and compliance frameworks improve.
Ripple’s ODL (On-Demand Liquidity) with XRP
What It Is: Ripple’s solution using XRP as a bridge asset to settle cross-border transactions more efficiently than traditional correspondent banking.
Pros: Fast, cheap, designed for cross-border use cases.
Cons: Institutions have shown reluctance to hold or rely on a volatile, non-stable token. Ripple technology can be used without XRP, and many banks do just that. Regulatory hurdles and no forced institutional need for XRP.
Likelihood of Widespread Use: Low-Medium (20-30%). While ODL is used in some corridors by certain remittance companies, large-scale adoption by major global banks remains unlikely given current incentives and risk profiles.
Stellar (XLM), Algorand, and Other Payment-Focused Cryptos
What They Are: Similar to XRP in speed and cost efficiency, often marketed for remittances and cross-border payments.
Pros: Technically efficient, often have partnerships with smaller fintechs or NGO projects.
Cons: Less brand recognition, fewer large-scale institutional tie-ins than Ripple. Little to no requirement for institutions to hold the native tokens.
Likelihood of Widespread Use: Low (10-20%). Most are overshadowed by bigger players or traditional improvements like SWIFT gpi.
Private Consortium Blockchains and DLT Platforms (R3 Corda, Hyperledger Fabric)
What They Are: Enterprise-grade distributed ledgers often used in closed networks for banking, trade finance, and settlement.
Pros: Tailored for enterprise use, privacy, compliance, and direct integration with legacy systems.
Cons: Many do not require a public token for settlement, which limits direct value accrual to a token like XRP. Adoption is often siloed within consortia.
Likelihood of Widespread Use: Medium (40%) for the technology itself. However, tokens associated with such solutions (if any) do not necessarily see broad usage.
Est. Odds of Institutional Use:
Upgraded Traditional Rails (SWIFT gpi): ~90%
Bank-Led Stablecoins (e.g., JPM Coin): ~70%
Public, Regulated Stablecoins (e.g., USDC, RLUSD): ~65%
CBDCs (if launched by major economies): ~60%
Ethereum-Based Settlement Layers (With Stablecoins): ~50%
Ripple’s XRP ODL Solution: ~20-30%
Stellar & Similar Payment Cryptos: ~10-20%
Private Enterprise DLT Tokens: ~10-20% (Tech adoption higher, token usage lower)
Analysis of the Competition
Major Banks’ Preferences: Banks and large financial institutions typically gravitate toward systems that minimize volatility, regulatory uncertainty, and operational risk. Hence, incremental improvements to SWIFT, bank-owned stablecoins, or well-regulated public stablecoins are more appealing than relying on a public, volatile crypto asset.
XRP’s Position: While XRP technology is fast and cost-effective, the key sticking point is that institutions do not need to hold or rely heavily on XRP itself to gain these benefits. The value proposition is overshadowed by stablecoins and the familiarity of existing rails. Regulatory complexities and the lack of forced adoption for the token further diminish its odds.
Future Developments: If stablecoins or CBDCs gain regulatory clarity and become well-integrated into international finance, they could usurp the need for a specialized bridge token like XRP. Ripple’s ODL could find niche uses, but broad mainstream bank adoption remains less likely compared to the more institution-friendly solutions listed above.
Does the XRP token have value accrual mechanisms?
This is something most people don’t even consider.
Sure XRP’s price has gone up due to speculation, but does the XRP token have any legitimate mechanisms in place that could lead to value capture for investors? And if so, what are the odds these are realized?
As of today (December 2024), the only real mechanism causing XRP to accrue value is speculative investing - which isn’t a legitimate real-world use.
Sure it’s possible XRP may become the dominant bridge asset for cross-border payments (e.g. institutions buy XRP with fiat, transfer it, and sell it for another) - but this is not guaranteed to happen to any significant degree.
Potential Value Accrual Mechanisms for XRP:
On-Demand Liquidity (ODL): If many institutions use XRP as a bridge asset to move between currencies instantly, the demand for XRP could rise, which might push its price upward (2x-10x). Odds of this happening are low.
Transaction Fees: XRPL burns a tiny fraction of XRP as fees for every transaction, slowly reducing supply. This deflationary mechanism is minimal, but over a very long time could have a small positive impact on scarcity. (Burn rates are negligible though so price impact will be low.)
Network Effects: Widespread usage of the ledger could enhance liquidity and reduce volatility, potentially attracting more participants. This, however, is only indirect since usage of XRPL doesn’t always mandate XRP demand.
Challenges:
Lack of Sustained Holding Incentives: Institutions using ODL only hold XRP for seconds or minutes. This minimal holding time doesn’t create sustained demand.
No Mandatory Use of XRP in RippleNet: Banks can use Ripple’s messaging and settlement software without touching XRP. Thus, increased RippleNet adoption does not automatically translate into more XRP buying pressure.
Likelihood of Major Institution and Bank Usage of XRP
Realistic Scenario:
Most banks and large financial institutions have shown reluctance to hold volatile cryptocurrencies.
They prefer stablecoins, central bank digital currencies (CBDCs), or simply leveraging Ripple’s software for messaging and settlement without using XRP.
Some niche corridors and smaller payment providers may find XRP useful for instant cross-border liquidity, but the volume required to significantly impact XRP’s price is uncertain.
In Other Words:
Using Ripple technology (like xCurrent or newer versions of RippleNet) does not require XRP.
Banks can benefit from Ripple’s tech stack without buying and holding large amounts of XRP.
Even if some institutions adopt ODL, the transient nature of XRP use limits long-term value accrual.
Why do people think XRP is a good investment?
A substantial portion of XRP’s trading and speculative run-ups historically occurred when investors conflated Ripple’s corporate deals with XRP adoption.
The narrative often goes: A bank uses Ripple tech → The bank must need XRP → XRP price should soar.
This logic is flawed when those banks do not need to hold XRP.
While some true believers argue for future large-scale ODL adoption, the track record so far shows limited consistent demand from big financial institutions for XRP itself.
Why many consider XRP to be anti-crypto?
Crypto purists often dislike XRP for several reasons tied to its origins, design, and purpose, which they believe conflict with the foundational principles of cryptocurrency.
1. Centralization (?)
Ripple's Control: XRP is closely associated with Ripple Labs, the company that created and largely controls the ecosystem. Crypto purists prefer decentralized systems like Bitcoin and Ethereum, where no single entity has control.
Validator Nodes: While Ripple argues XRP's ledger is decentralized, the majority of validator nodes were initially selected by Ripple, and they still have significant influence.
Token Allocation: A large portion of XRP's supply (over 50%) is held by Ripple Labs, leading to accusations of centralization and potential market manipulation.
2. Pre-Mining & Distribution
XRP was fully pre-mined, meaning all tokens were created at inception, unlike Bitcoin or Ethereum, which are mined over time through proof-of-work or proof-of-stake mechanisms.
Crypto purists see pre-mining as unfair or "anti-crypto" because it concentrates wealth among the founders and early adopters.
3. Philosophical Differences
Corporate Orientation: Ripple's primary goal with XRP is to facilitate cross-border payments and work with banks and financial institutions. Crypto purists, inspired by Bitcoin's ethos, generally advocate for disrupting or replacing traditional financial systems rather than working within them.
Regulatory Compliance: Ripple has actively sought to comply with regulators and integrate with legacy systems, which some purists see as a betrayal of the "anti-establishment" spirit of crypto.
4. Potential “Security” Classification
The ongoing legal battle between Ripple and the SEC over whether XRP is a security has fueled criticism.
Purists view the controversy as evidence of Ripple's centralization and lack of alignment with decentralized ideals.
5. Technical Criticisms
Consensus Mechanism: XRP uses a consensus protocol different from proof-of-work or proof-of-stake, which some argue lacks the same level of decentralization and security.
Use Case Doubts: Critics question whether XRP is necessary for Ripple's payment solutions since RippleNet can operate without the token, leading to concerns about its long-term utility.
While these criticisms resonate with many purists, others argue that XRP's focus on real-world utility and adoption in traditional finance gives it unique value, even if it diverges from the ideals of decentralization.
The debate reflects broader tensions within the crypto community over what the future of the space should look like.
Is XRP a Good or Bad Long-Term Investment?
I think it’s mostly junk. That doesn’t mean I’m going to short XRP or I think it doesn’t have a tiny % chance of achieving something major.
Most people betting on XRP as the “future of finance” are likely to end up highly disappointed when their investment tanks.
That said, XRP is a sticky crypto (retaining its spot in the top 10) with a cult-like Army that it makes for a good cyclical trade (i.e. buy during bear chop, sell after 2x-5x during bull mania) if you’re a trader/gambler.
Pros:
Fast, cheap transactions suitable for certain niche use cases.
Ripple’s partial legal victory reduced regulatory uncertainty.
A passionate community and occasional price spikes driven by speculation.
Cons:
Adoption of Ripple’s technology does not guarantee usage of XRP.
Institutions have no strong incentive to hold large amounts of a volatile asset.
Value accrual mechanisms for XRP are weak; banks can use stablecoins or non-crypto solutions.
Much of the excitement is based on the assumption of future utility that has not concretely materialized on a large scale.
Avoid XRP unless gambling… (it’s not a bad gamble if done at the right time)
If you want some XRP exposure, the smartest thing to do is buy when low (average in during a down market), then if/when it 2-3x’s - sell half to get your original investment out.
Now you have XRP exposure with “house money” and don’t need to worry whether it goes to the moon or ends up a big fat zero.
XRP’s price historically has been heavily influenced by speculation, community hype, and news events rather than sustained institutional demand for the token itself.
Each cycle XRP spikes, then crashes - but the trajectory has been upward:
2017: ~$0.07 to ~$2.70
2020: ~$0.25 to ~$1.65
2024: ~$0.60 to ~$2.60
While there may be niche use cases and some incremental adoption (especially in specific remittance corridors), the grand vision of global banking use of XRP is pure fantasy.
RLUSD and other stable, regulated digital assets on the XRPL may boost network activity, but they don’t inherently force large-scale XRP adoption.
Ripple would need the ODL and other XRP-dependent services to achieve massive, sustained institutional uptake (unlikely).
Thus, as a long-term investment, XRP’s fundamentals remain brutal.