The Cryptocurrency XRP Is Down 60%. Ripple Is Booming. Here's Why.

There aren't many crypto companies executing at the level Ripple is right now.

The closely held company just completed a $750 million share buyback at a $50 billion valuation, up 25% in a matter of months. It has spent nearly $3 billion recently acquiring businesses that extend its reach into traditional finance, including a $1.25 billion purchase of prime brokerage Hidden Road and a $1 billion deal for Treasury platform GTreasury.

The company continues to ink partnerships with major financial institutions. By any measure, Ripple is doing very well.

So what's the deal with XRP (CRYPTO: XRP)? The token is down about 60% from its record high in July high and hasn't posted an up month since September. How can the company behind XRP be expanding this fast while the token itself keeps falling?

Ripple's growth is not XRP's growth

The story XRP bulls tell is a simple one: More demand for Ripple's products means more demand for XRP. As major banking institutions adopt the technology, it will lead to more use of the token and its accumulation by large organizations.

If Ripple succeeds, XRP should, too, right?

Unfortunately, this relationship was always shaky. It's based on a faulty understanding of how the Ripple ecosystem actually works in the real world -- on the assumption that every Ripple partnership somehow translates into meaningful buying pressure for XRP.

Ripple offers two main products, and the one that is used by the major banks, and that makes headlines, is a messaging and settlement layer that doesn't interact with XRP at all.

The second, a payment system designed primarily for sending funds across borders, does make use of XRP directly as a bridge asset -- a go-between when converting, say, dollars into euros.

Image source: Getty Images.

Although this does have some demand effects, I've always been skeptical of just how much. But recently, the problem has gotten worse. The reason: RLUSD.

Ripple introduced this stablecoin last year, and it can be used in place of XRP as a bridge asset. That is extremely attractive to banks and other financial institutions that are traditionally wary of holding volatile assets if they don't have to. And XRP is a volatile asset.

Ripple's website now heavily features RLUSD. The payments page has a huge banner that reads, "Integrate stablecoin payments into your business." It is clear that the company is leaning hard into offering RLUSD as the primary way to interact with its cross-border payment system.

XRP has a supply problem that won't go away

XRP has issues on the supply side as well -- by design.

Ripple still unlocks 1 billion XRP every month, worth roughly $1.4 billion at current prices. The company typically relocks 70% to 80% of that, but it still leaves hundreds of millions of tokens hitting circulation every 30 days. About 38 billion XRP remain in escrow as of 2026, meaning this drip will continue for years.

What this means for XRP investors

Ripple is expanding rapidly and building a serious global financial infrastructure, and I'm confident that the company has a bright future in institutional finance.

Its products solve real problems, and the level of institutional engagement around the business is hard to ignore.
I am not confident, however, that this will translate into a bright future for XRP. The more successful RLUSD becomes, the less reason there is for XRP to capture the value Ripple creates.

The bottom line is, I expect XRP to underperform over the long term. That doesn't mean there won't be some rallies along the way -- the token can still be supported by hype and speculation -- but over the long haul, XRP is not going to be a winner.

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.