Token Velocity Could Be the Reason XRP Continues to Underperform

Despite moderate gains in recent weeks, XRP continues to underperform relative to other major cryptocurrencies, prompting renewed analysis from within the community.

Despite moderate gains in recent weeks, XRP continues to underperform relative to other major cryptocurrencies, prompting renewed analysis from within the community. One prominent XRP-focused commentator has suggested that a key factor, token velocity, could be explaining the asset’s lagging price movement.

While leading cryptocurrencies like Bitcoin and Ethereum have delivered significant returns over the past month, XRP’s growth has been notably slower. Bitcoin has gained approximately 17%, climbing above the $110,000 mark. Ethereum has seen an even steeper increase, rising nearly 50% to approach $2,700. In comparison, XRP has only recorded a 9% uptick and remains confined to the lower $2 range.

Although any upward movement can be viewed positively, some XRP holders have become frustrated with the asset’s limited progress, especially after the sharp price surge seen between November 2024 and January 2025.

Analyst Attributes XRP’s Price Stagnation to Token Velocity

According to the operator of the “All Things XRP” account on X, a potential reason behind the subdued price performance lies in XRP’s high token velocity. The analyst believes that many investors are unfamiliar with the concept and how it affects the token’s market behavior.

🚨 74.1% OF XRP INVESTORS DON'T KNOW WHAT "TOKEN VELOCITY" IS.

And it could be the real reason XRP struggles to moon.

If you hold XRP, you NEED to understand this.

Here’s the breakdown. 🧵👇 pic.twitter.com/3wcgJv0tRJ

— All Things XRP (@XRP_investing) April 27, 2025

Token velocity is an economic metric that measures how frequently a digital asset changes hands over a specific period. It is typically calculated by dividing the total transaction volume by the circulating supply. A high velocity suggests that the asset is actively traded, while a lower value indicates that holders are more inclined to retain it.

The analyst argued that a higher velocity exerts downward pressure on price because it implies frequent selling activity. When more holders are willing to retain their tokens rather than trade them, supply becomes constrained, which can support upward price movement.

XRP’s Function in the Payments Sector Fuels High Velocity

XRP’s design contributes directly to its high velocity. Built for speed and cost-efficiency, the XRP Ledger was intended to facilitate fast transactions, especially within cross-border payments. Many institutions using Ripple’s solutions, such as banks and remittance providers, typically purchase XRP to process transactions and then sell it shortly after.

This transactional behaviour differs from Bitcoin, which is often viewed as a long-term investment, or Ethereum, which benefits from staking and decentralized finance activity that encourages holding. By contrast, XRP’s use in rapid payment settlements keeps it in continuous circulation.

Adding to this dynamic are periodic token releases from Ripple’s escrow, which further increase the circulating supply and sustain high transaction volumes.

Exploring Strategies to Reduce Velocity and Drive Value

To address this challenge, the analyst proposed several ideas aimed at decreasing token velocity and encouraging longer-term holding. One approach involves implementing staking rewards on the XRP Ledger. This would provide holders with incentives to lock up their tokens, reducing market supply and potentially supporting price increases.

The analyst emphasized, however, that staking alone may not be sufficient. He pointed to the tokenization of real-world assets, such as property, commodities, and private equity, as a more impactful development. By using XRP in tokenization processes that require extended holding periods, velocity could be reduced, thereby enhancing scarcity and potentially driving price appreciation.

He also cautioned against the assumption that XRP’s role in payments alone will significantly increase its value. While the asset performs well in transaction processing, he argued that broader adoption through tokenization would provide a more sustainable and scalable source of demand.

: This content is meant to inform and should not be considered financial advice. The views expressed in this article may include the author’s personal opinions and do not represent Times Tabloid’s opinion. Readers are urged to do in-depth research before making any investment decisions. Any action taken by the reader is strictly at their own risk. Times Tabloid is not responsible for any financial losses.

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