Will XRP Hit $5? 3 Things That Could Make It Happen by 2027

XRP's (CRYPTO: XRP) recent price is about $2.55, but during the next couple of years, there's a real chance that it could roughly double to reach $5 or higher.

But for that to occur, three things in particular need to happen. Let's examine each so that you can decide whether to invest as these issues play out.

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1. Ripple builds out the financial value chain even more

Ripple, the business that issues XRP, is also responsible for building features and platforms that the XRP Ledger can offer to the chain's target users. Those target users are institutional investors and international banks that need to do a lot of money transfers across borders. Generally speaking, for a cryptocurrency like XRP to offer value to its organizations, it needs it to solve pain points. If it can solve pain points and make it more convenient to do core tasks as well, it's a big bonus, and that's what Ripple envisions for XRP.

XRP's ledger already supports critical assets for the financial industry like stablecoins as well as offering the ability to trade and hold real-world assets like U.S. Treasuries. Recently, Ripple also acquired a prime broker that will enable stablecoin-backed lending as well as some of the broker's transactions to be cleared using XRP in the back end.

That means banks using XRP will also gain the benefit of faster transaction closing times if they choose to use Ripple's broker on the network, which, when paired with the ability to borrow using their stablecoin holdings as collateral, makes it more convenient than moving the money off-chain and into the systems they had traditionally use for those tasks. Ripple will likely build out its systems in the future to provide more and more interlocking capabilities that incentivize users to park their capital on XRP's chain because there will be ample opportunities to put it to use for core applications.

And that will increase the price of the coin over time, potentially by a lot.

Image source: Getty Images.

2. Institutional and sovereign adoption accelerates

Many banks and institutional investors are testing XRP to replace their older, slower, and much more expensive money transfer technologies like SWIFT. That means over time, it's likely for more of them to shift their capital to XRP's network and store it there, pumping up the coin's value and saving them a lot of fees along the way. The more financial businesses opt to use XRP, the more demand for the coin.

Furthermore, some countries, like Bhutan, are working with Ripple to see if the XRP ledger might be the technology of choice for them to offer a central bank digital currency. If that happens, issuers of such currencies would need to buy and hold XRP to pay for transfer fees. Other countries, like the U.A.E., have already onboarded themselves to use the network for the purpose of processing payments with its stablecoins.

Aside from creating a nice headline when these larger players sign on to using XRP or its network, it creates enduring traffic and increases the appeal of others to follow suit, as transfers between wallet holders are so cheap that they're nearly free. These factors probably can't force the coin to $5 on their own, but in conjunction with the other bullish drivers, they could certainly contribute to some price gains between now and 2027.

3. Regulatory and policy tailwinds continue to strengthen

Historically, Ripple and XRP were subject to numerous lawsuits from regulators in the U.S., which depressed the price, hampered institutional adoption, and kept investors on the sidelines as they were rightfully wary of regulatory risk. But regulators have since dropped those lawsuits and generally done an about-face. Furthermore, with the inclusion of XRP in the potential National Digital Asset Stockpile in the U.S., it might actually pick up a regulatory and policy tailwind relatively soon, inverting its traditional scenario to the benefit of holders.

Soon, exchange-traded funds (ETFs) holding XRP might be approved by the Securities and Exchange Commission, which would likely cause the asset managers offering the proposed ETFs to procure more XRP. It would also likely drive more trading volume to the network, supporting higher prices. And all of the above increases the chances of the coin going to $5 in the near term, even if there's still no guarantee that it will happen.

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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.