Prediction: XRP's Price Will Soar Over the Next Year -- But Will It Last?

Right now, XRP (CRYPTO: XRP) is setting up for the kind of year that can make portfolios look a lot prettier. It has a brand-new U.S. spot exchange-traded fund (ETF), fresh institutional pilots, an upgraded ledger, more capabilities in development, and even XRP-focused treasury companies lining up to accumulate the coin.

But how much of the potential upcoming move will stick once the buzz fades? Let's unpack what is going on and what might actually last.

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Why the next 12 months are likely to go well

The newest catalyst for XRP is the approval of the first U.S. spot XRP ETF, the Canary XRP ETF (NASDAQ: XRPC) , which began trading on Nov. 13. Investors put a shocking $250 million into the fund in the first couple of days, making it this year's strongest crypto ETF debut so far. If that pace continues even modestly, it could mean a steady stream of new buyers for XRP over the next year. That would obviously support its price much higher for as long as the trend lasts.

On top of that, Ripple, the business that issues XRP, is making a push to get financial institutions onboarded to using the XRP Ledger (XRPL) as a financial tool. The company now counts more than 300 banks and financial companies as partners for its cross-border settlement network and related services, and it aims to integrate XRP itself into the core of all those functions. In practical terms, that means that investors should expect more payment flows to run on the XRPL, and more pilot programs where institutions hold XRP and its ecosystem assets as working capital on the ledger.

The XRP Ledger itself is also getting more capable. The network now has an automated market maker (AMM) feature, which is tightly integrated with the ledger's built-in (but underutilized) decentralized exchange (DEX). It also now includes tooling to issue tokenized real-world assets, such as funds or bonds, and to connect them with cross-chain lending and trading venues. That means it'll be a far more appealing place for asset managers to do their work.

Then there are the XRP-focused digital asset treasury (DAT) companies, which are now emerging. Ripple-backed Evernorth, for example, is going public via a merger, and it expects to raise more than $1 billion with the explicit goal of becoming the largest publicly traded holder of XRP. In effect, it will hoard XRP on behalf of public shareholders. Assuming that model works, copycats could emerge, deepening the pool of holders, and tightening the asset's float, thereby probably juicing prices even further over time.

Put all this together, and it's very easy to imagine a powerfully bullish year upcoming for this coin. Next, let's address the question of whether the gains might last.

Some of the growth is likely to be retained

While there's reason to believe that at least some of the upcoming growth is likely to be permanent -- for instance, growth derived from the ongoing tech upgrades to the XRPL -- other growth drivers are more questionable in terms of their long-term durability.

Short-term demand and long-term demand are different species. Over the next year, ETF inflows and headlines about new pilots could create a powerful feedback loop. People see price appreciation, feel validated, and buy more. But ETF capital flows are reversible. Just as investors can rush in, they can also redeem shares and rotate into whatever the next fashionable asset is, creating an outflow that will detrimentally affect the coin's price.

The same applies to XRP treasury companies and other DAT-like entities. Their entire business model hinges on XRP appreciating over time. If the coin's price overshoots its fundamentals, management teams will face pressure to lock in gains or diversify, which could mean selling precisely when retail investors would prefer they keep buying.

There are also clear competitive and execution risks that can trim back any initial surge or make it harder to continue growing at the same pace. XRP is not competing in a vacuum, and some of its competitors may succeed in winning in key crypto segments or in securing key customers.

In other words, the part of XRP's potential gains that is most likely to endure is the portion tied directly to on-ledger usage, like the growth stemming from the launch of new tokenized assets, stablecoin activity, compliant payments activity, and institutional asset management. The portion linked to excitement around ETFs and DATs is more fragile. Those structures are very helpful in the next leg up, but investors should not assume they are one-way doors.

So, stay bullish about this asset, but don't let your expectations outpace reality.

Alex Carchidi 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.