Here’s why Ripple’s success might not translate to XRP gains over the next five years.
XRP (XRP 2.06%), now hovering just below $1.50, deserves credit for having genuine utility in a market filled with meme coins and outright frauds. Created by Ripple, the token was designed to enable faster, cheaper transactions between financial institutions, especially across borders.
Partnerships with major banks, like Bank of America and Santander, show Ripple is doing something right.
So, where will XRP be in five years?
Image source: Getty Images.
There’s a key difference in Ripple’s products
The bull case has always been simple: The banking system’s adoption of Ripple’s technology will drive XRP demand. But in my view, this misunderstands how banks actually use — or don’t use — Ripple’s products.
Ripple offers two core products. Though they’ve been recently unified as features under the umbrella of “Ripple Payments,” I’ll use their former names for clarity.
RippleNet is a settlement system that allows for faster and cheaper transactions, improving on legacy systems. But it is essentially a messaging service, and banks typically use it without ever touching XRP. This is the service the big-name banks like Bank of America have experimented with or adopted.
On-Demand Liquidity (ODL), on the other hand, actually uses XRP as a “bridge asset” for cross-border transactions. When, say, sending funds from a bank in the U.S. to a bank in France, ODL converts the dollars to XRP and then into euros.
Bulls argue that growing ODL adoption will drive demand for XRP, but this doesn’t hold up — at least enough to move the needle — for two reasons:
- ODL serves smaller institutions facing liquidity constraints like fintechs and remittance providers, not major banks. It’s a relatively niche product that caps transaction volume growth.
- Institutions immediately convert in and out of XRP. Each buy order is instantly matched with a sell order, meaning the bulk of global volume doesn’t create any sustained demand.
Stablecoins could pose a threat
And there’s another wrinkle: Stablecoins have quickly found a footing within traditional finance and banking systems, making them more efficient while providing more stability than XRP. And with recent legislation, their role within the system is only likely to grow.
Ripple recognizes this. That’s why Ripple has undergone a rebranding and made several key acquisitions, including the $200 purchase of RAIL. It’s clear Ripple wants its own stablecoin, RLUSD, to be a major player in the industry. Ripple’s own website now prominently features “integrate stablecoin payments into your business.”
That’s a problem for XRP’s value. RLUSD can function as an alternative bridge asset in ODL transactions and erode its already limited demand pressure.
Is XRP a buy going forward?
In five years, Ripple will likely be a thriving payments infrastructure company, even more so than today. RLUSD will probably have gained meaningful traction as a bridge asset for cross-border transfers.
But even if Ripple’s products genuinely transform cross-border banking, I don’t think XRP holders will benefit from it. In five years, I see it having struggled to keep up with the rest of the market — or worse.