Ripple on the rise, but for how long?

Just a few months ago, Ripple seemed exhausted by its years-long legal battle with the U.S. stock market watchdog SEC. That XRP would ever again come close to its all-time high seemed unthinkable. But that was before Trump re-entered the White House. Since then, the cards within the crypto world have been reshuffled. The SEC withdrew massive lawsuits and last week also the one against Ripple. The price of XRP had already surged in anticipation. Meanwhile, the coin is 290 percent higher than a year ago more than any other coin in the top 10. And it looks like XRP could possibly even play a role in a future U.S. crypto reserve. Still, the current price rally is anything but solid.

Ripple: a use case with no future?

Ripple is undoubtedly one of the veterans in the crypto world. Founded in 2012, before Ethereum, it sought to address Bitcoin's weaknesses by focusing on fast and cheap payments. At its core is the XRP Ledger, on which the global payment network RippleNet is built.

RippleNet consists of three services:

• xCurrent, a system for real-time payments between banks

• xVia, an API solution for payment transactions

• xRapid, also known as On-Demand Liquidity (ODL), the only product that actually uses XRP as a bridge currency.

The latter is crucial. Ripple likes to show off a long list of partners, including American Express, Santander and Bank of America. And yes, they are indeed connected to RippleNet. But most of them are not using the ODL system-which means there is no direct demand for XRP either.

How often ODL is deployed at all is questionable. Well-known users include Japan's SBI Remit and Tranglo in Southeast Asia. But even there, the use of ODL has declined significantly. After the collapse of Silicon Valley Bank in March 2023, Tranglo largely stopped using the service. According to attorney Bill Morgan at X, ODL payments made up only a few percent of total transactions last year. "Tranglo even asked its ODL partners to temporarily stop using XRP," Morgan said.

Hardly any demand

Not only in the banking sector does XRP play a secondary role. It has also never really gained a foothold within the broader crypto ecosystem. Because the XRP Ledger so far does not support smart contracts, its role within DeFi is negligible. According to DeFiLlama, there is only $80 million in total value locked (TVL) on the network. Ripple did announce plans to integrate smart contracts this year, but it remains to be seen whether it can catch up with established blockchains.

So relying on a possible inclusion in a U.S. altcoin reserve to make XRP more important in the payments system seems like a risky gamble. In any case, the current demand for ODL does not indicate widespread adoption. Moreover, it is still unclear what such a reserve would look like. Trump did mention XRP as a candidate, but for now only confiscated cryptos are eligible, and that does not include XRP. Consequently, XRP was already not mentioned in the official decree on the Digital Asset Stockpile.

An uncertain future

Given all these developments, it is uncertain how XRP will evolve. Ripple may be able to ride on the positive sentiment for a while after the SEC lawsuit. But sooner or later that upward trend will level off. And then comes the inevitable question: what will drive demand for XRP then?