Are brighter days ahead for this digital currency? Check out Ripple's challenges and growth drivers.
More commonly known as Ripple, the XRP (XRP -0.02%) cryptocurrency seems to be in dire straits nowadays. Though it once soared to a short-lived peak of $3.09 per coin, Ripple hasn't touched the $1 benchmark since the spring of 2022. And the coin doesn't always follow the broader crypto market trends -- Ripple has dropped 15% over the last year while Bitcoin (BTC 0.40%) gained 133% and Ethereum (ETH 0.50%) prices rose by 75%.
But I see brighter days ahead for Ripple and its early investors. It looks ready to revisit that psychologically important $1 level in 2025. That's a lofty proposal with a 64% upside from today's Ripple prices, but I'm pretty convinced it will happen.
Now let me tell you why I might be wrong.
Why I'm wrong
Predicting the future price of any cryptocurrency is notoriously difficult, and Ripple is no exception.
The crypto market is highly volatile, influenced by regulatory changes, technological advancements, and investor sentiment. On top of that sectorwide volatility, Ripple has faced significant legal challenges, which adds another layer of uncertainty. The Securities and Exchange Commission (SEC) sued the Ripple Labs organization just before the holidays in 2020, arguing that Ripple and its leaders made $1.3 billion by offering an unregistered digital security.
If the legal outcome is unfavorable, it would almost certainly damage Ripple's price. Additionally, competition from other cryptocurrencies with more advanced features or stronger ecosystems could limit Ripple's growth potential.
So there's a non-zero risk that Ripple's digital coin will stay below $1 for the foreseeable future. In a worst-case scenario, the SEC's legal challenge could destroy the RippleNet global payment system, making its native XRP coin worthless in the long run.
Why I'm right
On the other hand, Ripple has several factors in its favor. I'm leaving the expected rise in Bitcoin prices out of this equation since the two currencies have trended in opposite directions recently. I'm still left with a substantial list of potential Ripple-boosting forces:
- The company has made significant strides in partnering with financial institutions for cross-border payments, positioning itself as a key player in this niche. If these partnerships continue to expand, and Ripple's technology proves superior, demand for XRP could increase, driving up its price.
- Beyond the basic idea of border-crossing payments, a handful of small countries are kicking the tires of Ripple's technology in their efforts to create a central bank digital currency (CDBC). The advanced experiments with Ripple-based national currencies in Palau and Bhutan may not move Ripple's needle very much, since their economies are rather small. However, early talks in larger markets such as Colombia and Hong Kong could lead to a serious difference.
- Generally speaking, a growing adoption of blockchain technology in financial services could benefit Ripple. The digital market for financial tools and services is growing larger, and Ripple already runs a successful business in this new market niche. RippleNet payments have soared in recent months, according to XRPscan data.
- And of course, there's a potential upside to the legal hassle. If favorable, the resolution of the SEC lawsuit could remove a significant overhang and boost investor confidence. It could also help the crypto market as a whole reach a higher level of regulatory certainty, especially if the lawsuit ends in a clear jury trial verdict rather than a settlement out of court.
Some of these upsides will take time to deliver market-moving benefits. The CBDC projects are already years in the making and shouldn't be rushed. Also, some of Ripple's CBDC ideas don't directly involve the XRP currency, so the direct impact on today's Ripple investors could be small.
Still, RippleNet is a promising service, and the value of the integrated coin could benefit from all of the factors above. That should be more than enough to regain the lost $1 plateau in short order.
Diversification and patience
Mind you, it's not "$1 or bust" for Ripple in 2025. Whether the cryptocurrency soars, holds steady, or even falls over the next year and a half, I expect it to deliver solid long-term gains as the global crypto market matures.
Investing in Ripple can be an exciting venture, but it's essential to keep a cool head and a diversified portfolio. The crypto market is unpredictable, and putting all your eggs in one basket can be risky. That's especially true when the basket is a single altcoin such as Ripple.
By holding a diverse range of digital assets and waiting for the market to mature, you increase your chances of long-term success. So yes, it's cool to invest in Ripple, but don't bet the farm on any particular idea. That hypothetical worst-case scenario may be unlikely -- but the risk is real.
Anders Bylund has positions in Bitcoin, Ethereum, and XRP. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.
