XRP Is Up 500% From a Year Ago. Is This Leading Cryptocurrency Still a Buy?

Key Points

• XRP has has soared during the past year.

• Its technology just got a major upgrade with long-term implications for the chain.

• Regulators are looking like they aren't as much of a threat anymore.

• 10 stocks we like better than XRP ›

One year ago, XRP (CRYPTO: XRP) traded near $0.55. Today it hovers around $2.94, a roughly 500% jump that leaves early buyers feeling like geniuses and latecomers trying to fight against their fear of missing out (FOMO).

It's obvious that huge moves are thrilling, but they also create a classic investing challenge. Should investors cash out, or pile in with more capital to press the advantage with a proven winner? Let's sift through what actually changed for XRP and why the next leg higher might still lie ahead.

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Image source: Getty Images.

The last 12 months rewrote XRP's narrative

One of the main drivers for XRP's startling run has been the ever-improving technology on its ledger, the XRPL.

On June 30, the XRPL Ethereum Virtual Machine (EVM) sidechain launched, giving developers Ethereum tooling for their smart contracts without leaving the XRP ecosystem.

For the uninitiated, this means that programmers can use the same programming language they use to code Ethereum apps to code apps that run on the XRP Ledger. In other words, developers can now port decentralized finance (DeFi) and other apps directly to the ledger without much additional work, which is an option that XRP simply lacked before. The synthesis of this information is that XRP could now start to attract Ethereum developers who are fed up with that chain's high gas (user) fees, thereby supercharging the ecosystem with new talent and thus new apps.

Regulations are also shifting very much in XRP's favor, and its long-running legal issues are finally abating.

A Manhattan judge last year capped the liability of Ripple, the company that issues XRP, at a $125 million civil penalty, and, on June 27, both Ripple and the Securities and Exchange Commission (SEC) signaled plans to drop their lingering cross-appeals, hinting the saga is near an armistice. Regulators had originally faulted Ripple over the question of whether XRP counts as a security. Now, given the Trump administration's retooling of the crypto market, it seems very likely that this issue is a thing of the past, with the outcome of future regulations almost guaranteed to heavily benefit XRP.

Why this rally might still be in its early innings

So, XRP is sailing in calm waters with both internally generated and external tailwinds to make the ride for holders into a pleasure cruise.

Smart contract compatibility is already broadening XRP's addressable market. DeFi lenders, prediction market operators, and synthetic asset platforms can now build without wrestling with the ledger's native scripting quirks. Even a modest migration of Ethereum-based liquidity would translate into incremental demand for XRP as the chain's reserve asset.

Meanwhile, as mentioned before, policy winds look unusually favorable at the moment, and the odds are good that conditions will continue to be balmy for the next couple of years.

With the SEC backing away from all-out litigation, institutional investors can engage with XRP and use it for their financial plumbing without worrying that subpoenas will land on their desks. Rule tweaks this summer also sparked confidence that spot XRP exchange-traded funds (ETFs) could clear the agency's October 17 decision deadline, a move that would lead asset managers to accumulate coins for creation baskets and, if holders are a tad lucky, create a supply shock that sends prices soaring.

What's the right move?

Despite the above, it's also obviously true that XRP no longer looks cheap on a one-year chart. It's guaranteed that its volatile swings in price will remain ferocious.

Yet the blend of a brand-new developer runway, dissipating legal risk, looming ETF catalysts, and on-chain utility signals that the recent surge rests on more than thin air.

It's still worth buying today. Should XRPL's revamped tool set and institutional push work as advertised, today's lofty price quote could look tame a few years down the road. Diversify, think long term, and let the thesis, not the thrill, guide your allocation.

Should you invest $1,000 in XRP right now?

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Alex Carchidi has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum and XRP. The Motley Fool has a disclosure policy.