Amid all the pro-crypto optimism surrounding the Trump administration, the price of XRP (CRYPTO: XRP) has absolutely skyrocketed. It's now up 450% since the election. And even with the recent pullback in the crypto market, XRP is still up more than 35% year to date.
The conventional wisdom is that XRP has nowhere to go from here but up. Is that really the case? If you are thinking about buying XRP now, there are three key questions you need to ask.
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1. Are XRP's regulatory issues finally over?
For more than four years, there has been a regulatory cloud hanging over XRP. In December 2020, the Securities and Exchange Commission (SEC) filed a lawsuit against Ripple, the company behind the XRP crypto token. According to the SEC, XRP is actually a "security," and that means that Ripple may have carried out an unregistered securities offering.
And the question of whether or not XRP is a security still hasn't been fully resolved. The case appeared to be settled in August 2024, when Ripple was ordered to pay $125 million in penalties to the SEC. But it keeps getting appealed, and it now looks like the case could extend into the second half of 2025. Thus, it may be too early to say that XRP's regulatory issues are finally over.
If you're an XRP investor, you really need to hope that a new-look pro-crypto SEC is going to settle everything in Ripple's favor. The current thinking is that the Trump administration is going to push for a more crypto-friendly approach in all regulatory matters, and that's a big reason XRP has been on a rocket ship since the election.
2. Will a new spot ETF be approved in 2025?
The other major factor involves a potential spot ETF for XRP. There are now seven different investment firms that have filed with the SEC for such a spot ETF, including several that already have spot Bitcoin ETFs. So it's easy to be bullish on the prospects of a future spot ETF for XRP. It really seems to be a matter of when, not if, it will get its first spot ETF.
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When that happens, the price of XRP could get another boost. The current thinking is that it could quickly soar to $4. That might not sound like a huge price target, but it would represent a new all-time high for the cryptocurrency, which traded as high as $3.84 in 2018. And it would represent a 40% uptick from today's price of $2.80.
Somehow, though, the numbers don't seem to add up. Right now, JPMorgan Chase is predicting that a new spot XRP ETF could attract anywhere from $4 billion to $8 billion in new investor money. Is that enough money to move the price of XRP, which currently has a market cap of $160 billion? Keep in mind: When Ethereum got its first spot ETFs in July of last year, they had little to no impact on its price.
3. Is XRP a best-in-class crypto?
Since it's nearly impossible to value cryptocurrencies on the basis of fundamentals, one key factor that I always look for is whether a specific cryptocurrency is best-in-class. Only invest in the "best" coins, and you're going to eliminate a lot of the risk of investing in "has been" and "never were" coins.
So, is XRP best-in-class? To answer that question, you need to take a deep dive into the blockchain payment network powered by the token. When it was launched in 2012, it made possible payments at a low cost and a high speed, and traditional financial institutions seemed to be at a competitive disadvantage.
But that was in the early 2010s. That was before Ethereum was launched in 2015. And it was well before faster blockchains such as Solana were launched in 2020. And that means the XRP blockchain is slower and less efficient than newer blockchains when it comes to processing transactions.
Moreover, XRP is still just a distributed blockchain ledger, rather than a smart contract platform. Ripple says smart contracts are coming in 2025, but we'll see. Until XRP gets smart-contract functionality, its overall utility is more limited than many people think.
How much higher can XRP go?
Based on the above, I'm not convinced that XRP has as much upside as other top altcoins. I need to see further action on the three issues outlined above before I'm ready to invest.
Namely, I want to see that pesky SEC case settled once and for all. I want to get much more clarity on a potential spot ETF launch. And I want to see smart-contract functionality added to the XRP blockchain.
Until this happens, XRP will continue to trade much like a meme coin. It will soar in price based on hype and speculation, and it could quickly give back all those gains as soon as the hype fades.
Granted, it's tempting to invest in XRP right now. But remember: In its entire history, XRP has never once traded above $4. That's simply not enough upside potential to justify a significant investment in what remains a risky, highly volatile cryptocurrency.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Dominic Basulto has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum, JPMorgan Chase, Solana, and XRP. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
