XRP falls 42% in 2024 as focus shifts to Ripple’s RLUSD stablecoin

XRP has declined by 42% since the start of the year, despite a series of regulatory and institutional developments that were expected to bolster the cryptocurrency’s value.

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Institutional access rises as legal challenges fade

Fire Hustle, a crypto-focused analysis platform, highlighted that recent moves by the US Securities and Exchange Commission (SEC) to drop its appeals have removed immediate legal uncertainties surrounding XRP.

Analyst Summer from Fire Hustle also pointed out the launch of seven funds centered on XRP operating in the United States, which have reportedly attracted $1.5 billion in inflows.

These developments have improved institutional access to XRP. With both regulatory concerns and access now less prominent, market observers are turning their attention to Ripple’s evolving product strategy for XRP.

XRP’s decline in 2024 has occurred even as seven US-based funds reportedly attracted $1.5 billion in investment and SEC legal appeals were dropped. However, questions are emerging over whether Ripple’s upcoming stablecoin could further limit XRP’s primary utility by offering a less volatile means for cross-border transactions.

Stablecoin launch may impact XRP’s utility

Ripple, the US-based blockchain company behind XRP, is preparing to launch RLUSD, a stablecoin pegged to the US dollar. Market commentators raised concerns that RLUSD could reduce bank demand for XRP in cross-border settlement.

Historically, XRP has served as a bridge asset, enabling banks to transact value between different fiat currencies by purchasing XRP in one currency, transferring it, and then selling it in another currency market. This system relies on banks accepting XRP’s price volatility as part of the transaction process.

RLUSD’s stable value may appeal to institutions wishing to avoid the risks of price fluctuations. Instead of using XRP for settlements, banks could opt for RLUSD, bypassing direct exposure to crypto market volatility and minimizing risk during large transactions.

Mini dictionary: RLUSD, Ripple’s planned stablecoin, is a digital asset pegged to the US dollar and designed to offer low volatility for institutional cross-border payments. Stablecoins aim to maintain a consistent value, easing concerns over price swings during settlements and providing an alternative to traditional fiat or volatile cryptocurrencies.

Should RLUSD be widely adopted, the main mandatory use case for XRP could shrink to serving as a source of transaction fees, which remain quite minimal at approximately a thousandth of a cent per transaction.

Network activity rises but token demand questioned

On-chain activity on the XRP Ledger has surged recently, with daily transactions reportedly tripling to about 3 million. This uptick suggests growing network usage amid ongoing product development.

However, Fire Hustle emphasized the distinction between increased network transactions and direct demand for the XRP token. With the possible integration of stablecoins like RLUSD, much of the rising value transfer could occur without the need for XRP purchases beyond the small amount needed for fees.

Market participants remain attentive to whether banks and payment providers will favor traditional bridge assets like XRP or regulated dollar-backed tokens for cross-border transfers, as this could have a decisive impact on long-term token demand and prices.