The XRP (Ripple) cryptocurrency has been trending upwards since summer of 2022. But its current value of £0.54p is a far cry from its January 2018 peak of £1.99. 

Where it could go next is anyone’s guess; crypto assets are notoriously unpredictable after all. Here, we look at some of the prevailing market forces (supply, demand, sentiment and competition) that might provide a clue on how its value could change in future.

No matter how thorough the analysis, however, cryptocurrency prices cannot be accurately predicted. Anyone who invests in crypto assets must be prepared to lose their entire investment.

Related: Bitcoin Price Prediction

Supply

There are currently 54,736,825,690 XRP in circulation, which is 54% of its cap of 100,000,000,000 XRP. As such, there’s plenty of headroom left in its supply, with no forthcoming constraints on the amount of new XRP being mined.

Assuming demand remains relatively constant, there aren’t any inflationary pressures on XRP.

One often-mooted factor in XRP supply is its ‘burn rate’. This is because for every XRP transaction that’s carried out, 0.00001 XRP is destroyed or ‘burned’ and removed from circulation. 

The more transactions that are executed, the more XRP are burned. In theory, this has an impact on supply, but at just 0.00001 XRP per transaction, there would need to be major widespread adoption of XRP to make a dent in its overall supply.

David Schwartz, the chief technology officer (CTO) of Ripple Labs, has himself dismissed the idea that climbing burn rates would increase the value of XRP.

In any case, the burn rate of XRP has been flat at around 0.012% since around July last year, notwithstanding an increase from 0.011% between December 2023 and March 2024.

Demand

The number of daily transactions can provide a gauge for the demand for a cryptocurrency. The more transactions being carried out, goes the theory, the more demand there is for that asset.

Relative to its entire history, XRP transactions are currently high, with a seven-day moving average of around 686,000 as of 7 March (according to data from theblock.co). At this point last year, the same metric was at around 218,000. 

However, current transaction figures are massively down on the early-January spike which saw transactions reach 5.4 million.

Google trends data can also show us how many people are searching for XRP. While searches for the cryptocurrency have gone through peaks and troughs, there’s been a slight uptick in interest since mid-February.

There’s also been an increase in the number of active XRP addresses, which can be said to reflect demand. The number peaked alongside the January spike in transactions, but has settled at a level higher than before the spike occurred.

With that said, there are now around 29,000 active addresses compared to around 40,000 during the same period last year, based on the seven-day moving average from theblock.co.

Sentiment

Sentiment has been a big driver for XRP prices, owing to ongoing litigation between Ripple and the US Securities and Exchange Commission (SEC).

Ripple, which developed XRP, was accused by the SEC of selling an unregistered security offering, raising $1.3 billion (£1 billion) in the process. Ripple has argued that XRP is not a security.

XRP’s value has risen and fallen along with various developments in the case.  When rulings appeared to be against Ripple, prices fell. When rulings appeared to be in Ripple’s favour, prices rose. In the end, there was a partial win for both Ripple and the SEC. 

Last July (2023), the SEC ruled that XRP was not a security when sold to the public on a crypto exchange, but was a security when sold to institutional investors. The case is ongoing, however, and speculators are looking towards the next deadlines for each party to file briefs, which have been extended into the spring.

Sentiment is also affected by movements in the market. For example, large transfers from investors (often referred to as ‘whales’) make speculators sit up and pay attention. 

A recent such move appeared to coincide with an increase in XRP’s price. A large transfer from crypto exchange Binance prompted speculations last week. 300 million XRP – equivalent to around $187 million at the time – was moved from Binance to an unknown wallet.

This was seen by some as a sign that investors were accumulating XRP because prices were about to increase.

Finally, and relevant to the wider crypto market, there are indices which attempt to measure sentiment. The widely cited Fear and Greed Index at alternative.me currently indicates a phase of “Extreme Greed”, which means investors are feeling bullish about cryptos’ prospects. This is up from last week’s “Greed” rating.

Competition

XRP isn’t strictly in competition with other crypto assets. Ripple (XRP) is a payments settlement system and currency exchange network designed to rival SWIFT (a money-transfer network) or to otherwise replace the settlement layer between major financial institutions.

Speculators will no doubt be more interested in XRP’s potential as an asset, rather than its utility – even if the two things are linked. In that sense, XRP is currently the world’s sixth largest cryptocurrency by market capitalisation.

It’s nowhere near comparable to the ‘big boys’ of Bitcoin and Ether, but its growth over the past 12 months is similar to BNB, the world’s fourth largest cryptocurrency by market capitalisation.

The movements of other assets can also be positive for XRP. The rising tide of Bitcoin appears to have lifted all crypto boats over the last few months, for example.

Is XRP a good investment?

Speaking to Forbes Advisor Australia, Grzegorz Drozdz, a market analyst at fintech firm Conotoxia said: “Investing in XRP is risky and may not be suitable for most investors due to the high price volatility and the difficulty in predicting future trends in the cryptocurrency market.

“Investment decisions should be made with a clear understanding of the risks involved. For some, XRP could present an exciting opportunity. For others, it may not align with their risk appetite or investment strategy.”