Where Will the Cryptocurrency XRP Be in 5 Years?

The cryptocurrency XRP (CRYPTO: XRP) is down more than 60% since peaking near $3.65 last July. It now trades around $1.30 -- roughly the same price it was before the Securities and Exchange Commission (SEC) settled its case against Ripple and spot XRP ETFs, like the Bitwise XRP ETF, launched in the U.S.

Two of the biggest catalysts bulls had been waiting years for have come and gone, and the token is right back where it started.

I think in the near term, you can expect more of the same, and I expect XRP to seriously struggle to keep pace with the broader crypto market over the next five years.

That doesn't mean I think banking adoption will slow or that Ripple, the company behind XRP, will suffer -- quite the opposite, in fact. It means that Ripple's success is not necessarily XRP's success, despite what many believe. As investors continue to catch on, the hype will fade.

Image source: Getty Images.

The disconnect between Ripple's business and XRP's value

Ripple has two main business lines. The side that major banks and financial institutions primarily use is a settlement messaging system that doesn't involve XRP itself. Banks prefer not to manage such a volatile asset.

The other side, used primarily by smaller institutions, often uses XRP to facilitate cross-border transactions. Users can send money to other countries seamlessly; dollars are converted to XRP and then into the desired destination currency. Bank partnerships around the world are a crucial part of this system.

The reality is that the first side handles significantly more volume, while the second lacks the size to really move the needle for XRP.

How Ripple's stablecoin threatens XRP's use case

And that was before Ripple's recent pivot. The company is now pushing its stablecoin, RLUSD, as a key part of its product offerings. And RLUSD can play the same role as XRP in cross-border transactions. Now, banks have the option of which "bridge asset" to use, and for organizations that prize stability above everything, that's not a hard decision.

This is an active choice by Ripple, hoping to capitalize on the explosion in stablecoin popularity -- and not get left behind by doubling down on an XRP-only ecosystem. The company's website now prominently features "integrate stablecoin payments into your business" as the first thing you see on its payments page. Ripple wins either way, but XRP holders don't.

What this means for XRP investors over the next five years

Five years from now, Ripple will likely be a bigger, stronger payments company. Adoption of its technology will have grown significantly. But even if that happens, even if its products genuinely transform cross-border banking, I don't expect XRP holders to see the benefits. This cryptocurrency seems destined for an uncomfortable future.

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.