Don't Buy XRP Until This Happens

XRP (CRYPTO: XRP), the native cryptocurrency of the XRP Ledger, reached its multi-year high of $3.65 last July. But as of this writing, it trades at about $1.40 per token. That pullback might seem like a buying opportunity, but I wouldn't touch XRP until one major thing happens.

Why did XRP plunge more than 60%?

XRP's price rose on three major catalysts last year. First, the Securities and Exchange Commission's (SEC) lawsuit against Ripple, the fintech company whose founders created XRP, finally ended with a lighter-than-expected fine. The conclusion of that legal battle, which began in 2020 after the SEC accused Ripple of selling XRP as unlicensed securities, prompted major cryptocurrency exchanges to relist XRP.

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Second, the SEC approved XRP's first spot price exchange-traded funds (ETFs), making it easier for retail and institutional investors to invest in the token without a crypto wallet. Lastly, the Office of the Comptroller of the Currency (OCC) conditionally approved Ripple's application for a U.S. banking license -- which sets the foundation for its broader fintech expansion.

However, XRP's rally sputtered out after investors realized there weren't many more near-term catalysts. Instead, it faces near-term challenges and intense macro headwinds.

The first major issue is the rise of stablecoins, or cryptocurrencies pegged to the U.S. dollar, as a bridge currency for blockchain-based fiat transactions. In the past, Ripple used XRP as a bridge currency to settle transactions (by directly converting both currencies to XRP and back) as a faster, cheaper alternative to traditional SWIFT interbank transfers.

But in late 2024, Ripple launched its own stablecoin, Ripple USD (CRYPTO: RLUSD), for the same purpose. Since Ripple USD consistently tracks the U.S. dollar, it's a more stable way to settle bridge currency transactions than XRP, which is volatile. While XRP might still be a good bridge token for decentralized and borderless transactions, Ripple USD could become increasingly important for stable fiat transactions as the company evolves into a digital bank.

Meanwhile, elevated interest rates, geopolitical conflicts, and other macro headwinds drove investors away from smaller altcoins like XRP. XRP couldn't be valued by its scarcity, unlike Bitcoin (CRYPTO: BTC), which is actively mined and has a fixed supply. It couldn't be valued by its developer ecosystem like Ethereum (CRYPTO: ETH), since the XRP Ledger didn't natively support the smart contracts used to develop decentralized apps and tokens.

What's the one thing that would make XRP a buy?

The one catalyst that would drive XRP's price higher would be a clear partnership with a Tier-1 bank or major payment network to use its token to settle large payments.

XRP has launched only a few pilot programs and partnerships with Asian banks in Japan and Southeast Asia so far. However, its Japanese pilot program recently found that cross-border transactions with XRP cost 60% less than SWIFT transfers. Japanese investors also invested $21.7 billion in XRP from July 2024 to June 2025, making Japan XRP's largest national market.

Therefore, if Japan's top banks officially adopt XRP as the rails for their cross-border transfers, other countries could follow that lead. In the U.S., the CLARITY Act -- which was approved in the House of Representatives but is still being debated in the Senate -- could also allow U.S. financial institutions to adopt XRP as a bridge currency for cross-border transfers.

If that happens, XRP would emerge as a preferred bridge currency for countries that aren't dependent on the U.S. dollar. At the same time, Ripple USD could be a good alternative for countries that still tightly tether their own currencies to the U.S. dollar. Therefore, both of these tokens could thrive as they disrupt traditional SWIFT transfers.

But until XRP secures a concrete partnership with a major financial institution that can be scaled to process a meaningful amount of payments, I wouldn't bet on its long-term recovery. It still faces many existential challenges, and a lack of fresh catalysts could keep the bulls away.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.