The price of Ripple’s cryptocurrency XRP has surged over 300% in a month and it is up nearly 1,000% from levels of $0.22 in early 2021 to $2.37 now. In fact, XRP has become the world’s fourth-largest cryptocurrency with a market capitalization of around $135 billion – after Bitcoin, Ethereum, and Tether – thanks to its recent rally.
The surge in XRP mirrors the trend seen across cryptocurrencies after Trump won the U.S. presidential elections, as hopes that the new administration will take a friendly approach toward digital currencies sparked unprecedented interest in them. After all, in one of his rallies, Trump said he would make the U.S. the “crypto capital” of the world. This has led to the most popular cryptocurrency, Bitcoin, crossing the $100,000 mark for the first time ever – more than doubling from the level of $44,000 at the beginning of the year.
Ripple is a digital payment network that uses its cryptocurrency, XRP, to facilitate fast and low-cost international money transfers. For Ripple, it’s not just the Trump factor driving the move in XRP. Back in 2020, the U.S. SEC alleged that Ripple raised more than $1.3 billion in 2013 by selling XRP in an unregistered security offering to investors. Ripple stated that XRP should not be treated as a security. In 2023, the court ruled that XRP was not a security when sold to the public on an exchange and that it did not violate federal securities laws. However, the court also ruled that XRP is a security if sold to institutional investors. This mixed ruling led the SEC to seek a $2 billion fine against Ripple. But this didn’t go the SEC’s way, and the court imposed a $125 million penalty instead. A couple of months back, a judge denied the SEC’s motion to appeal the ruling.
Earlier this month, a group of state attorneys general and the DeFi Education Fund sued the SEC, alleging unconstitutional overreach. In this particular instance, the regulator is accused of exceeding its regulatory obligations by initiating enforcement actions against digital asset exchanges. [1]
The result? The current chair of the SEC – Gary Gensler – will step down on January 20, 2025, and it’s likely the new person stepping in will be more crypto-friendly. One of the possible candidates includes Paul Atkins, who will be seen favorably by the crypto advocates. There’s a chance that the SEC may drop the entire case against Ripple, which will be another positive for XRP.
Overall, XRP has had a great couple of months, and with the Trump administration, this breakout could well be just the beginning of a much larger rally. A key driver of growth for XRP is likely to be Ripple’s impending launch of the RLUSD stablecoin. The RLUSD is currently awaiting approval, and as a stablecoin, it will be fully backed by cash in the form of USD, government treasury securities, and other cash equivalents.
Although XRP has seen a stellar 1000% rise since early 2021, the returns haven’t been consistent. Returns for XRP were 278% in 2021, -59% in 2022, and 81% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that XRP underperformed the S&P in 2022.
In fact, consistently beating the broader markets — in good times and bad — has been difficult over recent years for individual stocks and even cryptocurrencies. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
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