XRP Could Hit $4 This Year, but Here's the Catch

The cryptocurrency market had a spectacular 2024, with the cumulative value of all coins and tokens in circulation hitting a record high of $3.9 trillion in December.

XRP (XRP 0.99%) had an incredible year in 2024, easily outpacing the broader cryptocurrency market with a gain of 230%. The company that created XRP (Ripple) has been locked in a battle with U.S. regulators since 2020, but investors became extremely bullish after Donald Trump's election win in November, because it appears he will lead the most pro-crypto administration in history.

XRP is trading at about $2.30 as of this writing, but can it ride that tailwind to a record high of $4 during 2025?

XRP was designed for Ripple's innovative payments network

Not every bank around the world uses the same payments infrastructure. Some are on the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network to transfer funds and others aren't, so it can take days to settle transactions between banks. Ripple created a unique network called Ripple Payments, formerly RippleNet, that solves that problem.

It works with all existing infrastructure to standardize payment protocols, so that banks can talk to each other even if one uses SWIFT and the other doesn't. That means they can use Ripple Payments to cut out intermediaries and settle transfers directly, making them almost instantaneous.

The XRP cryptocurrency was designed to standardize each transaction. For example, a Japanese bank can send XRP to a German bank instead of sending Japanese yen, to bypass currency exchange fees and other transaction costs. The two banks can then handle their own conversions from XRP to a fiat currency of their choice.

Therefore, unlike most cryptocurrencies, XRP has a legitimate use case that could become a source of long-term value.

Lighter regulation might benefit XRP in 2025

XRP has a total supply of 100 billion tokens. There are 57 billion in circulation, and Ripple controls the other 43 billion, releasing some into the market each month to meet demand. Therefore, XRP is very different to a truly decentralized cryptocurrency like Bitcoin (BTC -0.07%), which has a fixed supply and isn't controlled by any individual or company.

As a result, the U.S. Securities and Exchange Commission (SEC) sued Ripple in 2020, claiming the XRP token should be classified as a financial security, like a stock or a bond. Companies that issue securities must register them and operate under a strict regulatory framework, so this legal battle had dire potential consequences for Ripple's business.

The lawsuit was partially resolved back in August, when a judge decided that XRP might only be a security in specific circumstances, such as when new supply is issued to institutions. However, it might not be a security when it's traded on exchanges or used in transactions. Ripple was ordered to pay a fine of $125 million, but the SEC is appealing the decision, which, under normal circumstances, would tie the parties up in court for several more years.

But Trump's election win in November could change everything. Based on his comments on the campaign trail, he might be the most pro-crypto president in U.S. history. Plus, he already nominated pro-crypto businessman Paul Atkins to run the SEC, pending Senate confirmation, so investors are speculating that Ripple's regulatory woes might soon disappear.

That's why most of XRP's 230% gain in 2024 occurred after the Nov. 5 election.

XRP could hit $4 this year

XRP's current price per token of $2.30 is still significantly below its record high of $3.40 from 2018. Nevertheless, it has a market capitalization of more than $130 billion, which makes it the fourth largest cryptocurrency in the world behind Bitcoin, Ethereum, and Tether.

If XRP were to rise to $4 per token this year, its market cap would be about $230 billion, based on the current circulating supply of 57 billion tokens. That's a mere fraction of Bitcoin's market cap of $1.9 trillion, and I would argue XRP actually has more utility thanks to its association with Ripple Payments.

But here's the rub: Banks don't have to use XRP to use Ripple Payments -- they can settle transactions in fiat currencies, too. Therefore, XRP's value isn't necessarily tied to the success of the payments network for which it was designed. That means its price is heavily influenced by speculators rather than organic demand for use in bank transactions.

Moreover, while Ripple has been fighting the SEC since 2020, the agency actually approved dozens of Bitcoin exchange-traded funds last year, giving financial advisors and institutional investors a safer, regulated way to buy it. That's part of the reason Bitcoin has such a premium valuation relative to every other cryptocurrency, including XRP.

Therefore, while it'