Where Will XRP Be in 3 Years?

The value of XRP (Ripple) (CRYPTO: XRP) has surged over the past several years thanks to a generally optimistic view of cryptocurrencies, the SEC ending a lawsuit against Ripple Labs, and the prospect that XRP exchange-traded funds (ETFs) will be approved by the government soon.

As a result, XRP is up a staggering 387% over the past three years. But there are signs that not all is well in crypto paradise. XRP has lost ground over the past few months as investors consider the latest economic news showing that job growth is slowing considerably. The rise of cryptocurrency values depend on a significant appetite for risk, which investors tend to lose when the economy slows.

So, let's take a closer look at both the bull and bear cases for XRP to understand where cryptocurrency might be headed over the next three years.

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XRP's bull case over the next three years

The same reasons why XRP has soared over the past few years could continue to be catalysts for more gains in the coming years. For example, XRP investors have latched onto the hope that the government will approve ETFs for the cryptocurrency. That could happen as soon as this month, and investors are right to be excited.

Since Bitcoin ETFs launched last year, they've been very popular, helping to push Bitcoin's value up over the past year. There's now $161 billion in assets under management in these funds, showing just how much interest there is in cryptocurrency ETFs. Ethereum ETFs have been approved as well and have also proved popular with investors.

Some of XRP's gains are already baked into its value of the cryptocurrency in the hope that the ETFs will launch soon, but it's also possible that they continue to drive XRP higher as more people gain an easier way to invest in XRP.

XRP's bear case over the next three years

With all that said, I think there could be some significant headwinds for XRP over the next few years. Let's take the bear case for the economy, for example. Recent ADP data showed two consecutive months of job losses. Worries that the job market is stalling have been one of the reasons why investors have retreated from XRP and other cryptocurrencies over the past month.

If the economy slows down further, there would likely be a significant pullback in crypto investments. When people aren't worried about their jobs or paying their bills, they're more open to investing in riskier investments, like XRP. But that appetite for risk could fade away as investors grow concerned about the job market and the rising costs because of tariffs.

There's also increasing evidence that Americans are having a hard time paying some loans, including for their cars. Auto loan delinquencies have risen recently, and the New York Federal Reserve said last year that even borrowers with above-average credit scores are twice as likely to fall behind on their payments right now compared to before the pandemic.

If more evidence emerges that the economy is slowing, people will likely shift their attention toward safer investments and away from cryptocurrencies.

Which scenario is more likely over the next three years?

I think investors should be cautious about the crypto market in general right now, including XRP. Tariff uncertainty and rising concerns about the economy could significantly hamper cryptocurrency gains over the next few years.

Many stocks and cryptocurrency values have soared over the past few years, but the downside is that it's starting to create a feeling that risky bets can't lose. That is, of course, not true. If the economy does slow down soon, we're likely to see XRP investors flee to safer assets. All of this means that potential XRP investors should take a very cautious approach to buying the coin right now and expect more volatility ahead.

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