Token Velocity Might Be the Reason Behind XRP's Slower Growth This Month

Amid the slower growth XRP price has observed this month, a community analyst has called attention to token velocity as a possible reason.

Amid the slower growth XRP price has observed this month, a community analyst has called attention to token velocity as a possible reason.

While Bitcoin and Ethereum continue to post strong gains this month, XRP struggles to keep up. For instance, Bitcoin has seen a 17.59% uptick in recent weeks, now trading above $110,000. Interestingly, Ethereum has done even better, surging nearly 50% and closing in on the $2,700 mark. Notably, the latter coin is now testing the crucial Fib level of 0.5 and aiming for the 0.618 Fib, presenting a remarkable bull run.

In contrast, XRP has seen only an 11% increase over the same period and remains stuck in the lower end of the $2 range after pivoting from the lower Fib. Although the 11% gain remains bullish, investors are growing impatient, especially after its November 2024 to January 2025 surge.

The analyst behind the popular “All Things XRP” account on X believes he knows why. Specifically, he recently pointed to XRP’s “token velocity” as a major reason the token hasn’t seen the same price surge. According to him, most XRP holders don’t understand what token velocity is.

For context, token velocity measures how quickly a cryptocurrency moves from one holder to another. It is calculated by dividing the total transaction volume by the circulating supply.

Essentially, a high velocity means market participants constantly trade the token, while a low velocity shows that more investors are holding it.

The analyst explained that when a token changes hands frequently, it puts more sell pressure on the market, which can push the price down. However, when people hold a token instead, supply tightens and prices rise, following the basic supply and demand law.

The analyst explained that when a token changes hands frequently, it puts more sell pressure on the market, which can push the price down. However, when people hold a token instead, supply tightens and prices rise, following the basic supply and demand law.

This makes XRP ideal for fast, low-cost transfers but works against its price growth, and many investors may not realize these simple mechanics. Notably, Ripple has also confirmed that its payment solution uses XRP in a way that does not impact its price significantly due to quick movements.

To improve XRP’s long-term price outlook, “All Things XRP” suggested a few possible solutions. One of them is introducing staking incentives to reward users for holding rather than trading the token. Note that Ripple is looking to introduce native staking to the XRPL.

Nonetheless, he pointed to real-world asset tokenization as the most promising path forward. Tokenized assets like real estate, commodities, and private equity could use XRP in a way that locks it up rather than moves it around. That would reduce velocity, increase scarcity, and push prices higher over time.

The analyst also dismissed the idea that XRP will “moon” simply because of its use in payments. He argued that while XRP excels as a transactional tool, payments alone won’t deliver major price gains. Instead, he sees tokenization as the real driver of future value.