Can XRP reach $5 in 2025?

The cryptocurrency market is on edge 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 lowest market cap of $823 billion in 2022.

XRP (XRP -14.62%) is the token created by the fintech company Ripple in 2012, and it is up 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 series of tailwinds could propel XRP to new highs in 2025. Could it rise to $5 from the current price of $2.55?

Image source: Getty Images.

Ripple built an innovative payment network

It can take several days for banks to send money to other banks abroad using regular bank transfers because they sometimes use different infrastructure (some use the SWIFT network, while others do not). This means that intermediary banks must be involved to act as intermediaries for each transaction, creating delays.

Ripple designed the Ripple Payments network (formerly RippleNet) to streamline this process. Its technology works with all existing banking infrastructure to standardize payment protocols.

For example, it allows banks in the SWIFT network to “talk” to other banks that do not use SWIFT. This means that banks can settle transactions with each other directly, so transfers via Ripple Payments are virtually instantaneous.

The XRP cryptocurrency, which Ripple controls, helps standardize these transactions. For example, a US bank could send XRP to an Italian bank instead of sending US dollars because it would bypass currency exchange fees and other transaction costs. The banks on each side of the transaction can handle their own conversions between XRP and their desired fiat currency.

Therefore, while speculation is a major driving force for the price per XRP token, there is a source of real demand from financial institutions that use it to process transactions.

XRP may benefit from a lighter regulatory environment in 2025

The US Securities and Exchange Commission (SEC) hit Ripple with a lawsuit in 2020 alleging that the XRP token is a financial security (like a stock or bond). Companies that issue securities must register them and operate under a strict regulatory framework, which meant that Ripple’s activities would be significantly 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: About 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 the supply, so I understand the SEC’s perspective.

A cryptocurrency like Bitcoin, for example, does not have this problem because it is not controlled, endorsed or issued by any company or individual.

In August 2024, the judge ruled that XRP can only be a security under specific circumstances, such as when a new supply is issued to institutional investors, but not when it is 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, although the SEC is appealing the decision.

But the changing political climate after the 2024 US presidential election could change everything. Current SEC Chairman Gary Gensler has announced his intention to step down from the commission on January 20, and with the nomination of a pro-crypto businessman to take Gensler’s place, XRP investors are already hopeful, that the federal government’s policy on the issue could see a massive shift.

XRP may reach $5 in 2025

Banks do not need to use XRP to use the Ripple Payments network because it is also compatible with fiat currencies. This means that the value of XRP is not necessarily tied to the success of Ripple Payments.

As a result, the price of XRP often fluctuates based on the whims of speculators who buy it in hopes that it will move higher. Despite its 325% gain in 2024, it still hasn’t regained its 2018 record high of $3.40.

But if there’s one thing we learned in 2021, when meme tokens like Dogecoin and Shiba Inu skyrocketed, it is to never underestimate the power of a speculative frenzy. There isn’t really one fundamental the reason why XRP will double from here and reach $5, but it is possible that investors will start to price in Ripple’s potential under a lighter regulatory regime – although it is not 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 is not widely used as a payment mechanism by consumers or businesses.

This means that 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 reaches $5 in 2025, it won’t necessarily stay there. After peaking at $3.40 in 2018, it fell 96% to just $0.13 in 2020, and there’s no reason it can’t happen again if its current rally peters out.