Where Might XRP Stand Three Years From Now?

Investing with a long-term perspective is essential for achieving steady gains in financial markets, as it helps to mitigate short-term price swings and allows the underlying value of an asset to emerge over time. This principle is particularly important in the crypto space due to its extreme volatility . Let's take a closer look at the advantages and drawbacks of an asset such as XRP ( XRP -3.11%) to explore what could unfold over the next three years.

A leading cryptocurrency

It has been 16 years since Bitcoin gave rise to the world of cryptocurrencies. Since then, investors have had ample opportunity to observe how these digital assets perform over the long haul. Some notable patterns have surfaced.

To begin with, there is a distinct contrast between the performance of major blue chip  cryptocurrencies, which generally appreciate gradually, and the more speculative coins, which often experience dramatic cycles of boom and bust without a consistent upward trajectory.

With a market cap of $171 billion, XRP ranks as the fourth-largest cryptocurrency, following Bitcoin, Ethereum, and Tether (with which it frequently alternates positions). Its established presence and longevity (XRP was introduced in 2012) provide it with greater brand awareness and credibility compared to the multitude of newer tokens, even if some of those may have more advanced technology.

Emphasizing practical applications

Valuing cryptocurrencies is notoriously challenging, since unlike stocks or bonds, they are not linked to companies generating revenue or profits. The team behind XRP, Ripple Labs, has focused on enhancing the project’s real-world usefulness. Traditionally, their efforts have centered on revolutionizing cross-border payments, where XRP can serve as a bridge between different fiat currencies .

For instance, if you wish to transfer U.S. dollars to Japan, you could convert dollars into XRP and then use those tokens to buy Japanese yen, thereby avoiding expensive intermediaries such as bank wire services or money transfer companies like Western Union and MoneyGram. While many cryptocurrencies can be used this way, XRP is notable for its strong brand and its extremely low transaction fee of just 0.00001 XRP per transfer.

Ripple Labs has continued to expand its role in the fintech sector by launching a new dollar-backed stablecoin named RLUSD. This has drawn attention from major financial players such as Singapore’s DBS Bank, which intends to use RLUSD to provide crypto lending services to its clients. Although RLUSD is a separate asset from XRP, both operate on the same blockchain ledger, so increased use of RLUSD could drive up demand for XRP, as it is needed to pay transaction fees on the network.

In July, Ripple advanced its ambitions by applying for a national bank charter in the United States. Securing this license could further legitimize its digital assets and make it easier for Ripple to process payments and eliminate the need for intermediary banks when developing its financial technology solutions.

What could happen over the next three years?

Looking ahead, XRP’s trajectory will likely be shaped by both broader economic factors and developments specific to the asset. On the macroeconomic front, it could benefit from declining confidence in the U.S. dollar. The dollar index has dropped a significant 10% so far this year. Political instability and increasing national debt may push it even lower, prompting investors to seek alternatives like XRP and other established cryptocurrencies as stores of value.

Most significantly, Ripple Labs’ commitment to practical use cases and its new ventures in stablecoins and financial services should help XRP maintain its relevance as the crypto sector becomes more crowded and competitive. The asset appears well-positioned to deliver strong performance over the next three years and beyond.