XRP (CRYPTO: XRP), the native token of the XRP Ledger, lost nearly 40% of its value over the past four months and underperformed many of the market’s top cryptocurrencies. During that same period, Bitcoin and Ethereum fell 23% and 16%, respectively. Let’s see why XRP collapsed — and if might bounce back in 2026.
XRP isn’t mined with the proof-of-work (PoW) consensus mechanism like Bitcoin. It also isn’t a proof-of-stake (PoS) token like Ether, so it can’t be “staked” on its blockchain to earn interest-like rewards. It doesn’t natively support smart contracts — which many PoS blockchains offer for the development of decentralized applications (dApps).
In other words, XRP can’t be valued by its scarcity like Bitcoin or its usefulness for developers like Ether. Instead, the fintech company Ripple Labs minted XRP’s entire supply of 100 billion tokens prior to its market debut in 2012. Ripple initially owned 80 billion of those tokens, and gradually reduced that position, but still owns nearly half of its supply.
XRP’s critics argue that ownership makes it a centralized token instead of a decentralized one like Bitcoin or Ether. They also claim it isn’t a “real” cryptocurrency because it was pre-minted and isn’t supported by a PoW or PoS blockchain. Instead, XRP is primarily used as a “bridge currency” to speed up transactions on Ripple’s platform.
Ripple even sold its own XRP tokens to fund its expansion, which sparked a lawsuit from the Securities and Exchange Commission (SEC) in 2020. The SEC accused Ripple of selling its own tokens as unlicensed securities, and the top crypto exchanges subsequently delisted XRP. That lawsuit finally concluded this August with a lighter-than-expected fine for Ripple and a ruling that its publicly listed tokens weren’t unlicensed securities. The top exchanges finally re-listed XRP, and several asset management firms submitted their applications for spot price XRP exchange-traded funds (ETFs). One unique ETF, the REX-Osprey XRP ETF, even started trading on the Chicago Board Options Exchange (CBOE) by structuring itself under the Investment Company Act of 1940 (“40 Act”) for a simpler and shorter SEC approval process.
The conclusion of the SEC lawsuit brought back the bulls, and XRP’s price surged from a multiyear low of $0.31 in June 2022 to a record high of $3.65 this July. Declining interest rates, social media buzz, and a fear of missing out amplified those gains by driving investors back toward the crypto market.
At the time, many bullish investors expected its price to surge above $4. But it ran out of steam for three reasons. First, XRP’s spot price ETF approvals remain in limbo, and the government shutdown in October and November likely delayed those potential approvals at the SEC. Second, many investors took profits over the summer after XRP’s massive three-year rally. Lastly, U.S. Treasury yields stayed stubbornly high even as interest rates fell, presumably due to fears of sticky inflation, a potential recession, and the issuance of more government debt. Those high yields kept many investors locked up in Treasuries and away from riskier investments.
XRP’s near-term prospects might seem dim, but investors shouldn’t overlook its potential catalysts. The SEC could finally approve its first spot price ETFs next year, and those approvals could stabilize its price while attracting more retail and institutional investors.
The XRP Ledger has also been rolling out Ethereum-compatible “sidechains” to tether more smart contracts and dApps to its blockchain. That won’t turn it into a big native development platform like Ethereum, but it could make XRP a more useful token for those applications. Ripple’s application for a U.S. bank charter this July could support its expansion into a full-fledged digital bank in 2026. If that happens, XRP could be more widely adopted as a bridge currency for cross-border transactions. It could also complement Ripple’s own stablecoin, Ripple USD (CRYPTO: RLUSD), as a hedge against inflation for overseas users with limited access to U.S. dollars.
If those tailwinds kick in, the Fed keeps cutting its benchmark rates, and Treasury yields finally decline, XRP could certainly bounce back. It should remain volatile through the end of 2025, but it has a shot at recovering and rallying to fresh highs in 2026 and beyond.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.
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