Summary XRP has surged from a laggard to a top-performing asset in a matter of just 3 weeks, and is now ranked third on CoinMarketCap. The re-election of Donald Trump and the impending resignation of SEC Chairman Gary Gensler are key catalysts driving renewed interest in XRP. On-chain metrics and blockchain usage data suggest mixed fundamentals supporting XRP's recent performance surge. The biggest question is what are investors willing to pay today for tomorrow's potential? At a $262 billion fully diluted market cap, XRP is more 'valuable' than Wells Fargo. When I covered the XRP/Ripple USD ( XRP-USD ) for Seeking Alpha back in March, the coin had been lagging the broader smart contract segment in the digital asset market. I hypothesized that XRP was lagging for a reason, and cited several data points that I felt justified that assertion. Things change. Not only is XRP no longer lagging other smart contract gas tokens, but in just three weeks, XRP has rapidly morphed from a laggard to a top-performing asset over the last 12 months: Data by YCharts On November 6th, XRP's 12-month performance was negative 10%. Fast-forward to December 1st; the token has a 12-month return approaching 300% and has also taken out both Solana ( SOL-USD ) and Tether ( USDT-USD ) for the number 3 spot on CoinMarketCap's asset valuation list after Bitcoin ( BTC-USD ) and Ethereum ( ETH-USD ). CoinMarketCap Justified? Let's try to find out. In this update, we'll dive into possible news-related catalysts that could be driving this move and review many of the same blockchain usage metrics that I shared in my March piece. Potential News-Related Catalysts Perhaps one of the biggest reasons exuberance has returned to the 'alt-coin' market in recent weeks is the re-election of former US President Donald Trump. Something that was generally foreshadowed by myself and others over the summer was that President Trump was clearly positioning to be the friendlier candidate for the digital asset market. Subsequent to Trump's victory last month, US Securities and Exchange Commission Chairman Gary Gensler announced he would be stepping down on inauguration day. Gensler's SEC has been widely viewed as antagonistic to the cryptocurrency industry, and the agency developed a reputation for being 'capricious and arbitrary' in addition to being active from a litigation standpoint. The latter of which has specifically had an impact on XRP Ledger developer Ripple Labs. In my view, President Trump's re-election and Gary Gensler's eventual resignation are two very positive catalysts for Ripple Labs and by extension XRP token holders. We've also seen several applications for XRP ETFs from companies like Bitwise and 21Shares. Monthly Stablecoin Transfer Volume (IntoTheBlock) That said, the bigger catalyst may be the planned launch and potential regulatory approval of the RLUSD stablecoin on the XRP Ledger. The chart above is showing the monthly transfer volume currently seen on EVM blockchains on a monthly basis. Monthly volume surpassed $1 trillion for the 3rd time in the last 5 months in November. Total stablecoin supply recently hit a new record of $192 billion last month, per data from IntoTheBlock. Stablecoins are a very important part of the public blockchain ecosystem, as they allow end users the ability to swap out of digital currencies into something with more perceived stability on-chain without requiring a centralized exchange. Furthermore, stablecoin payments allow P2P transactions with a familiar unit of account on public blockchain rails. This opens up the possibility of quick, inexpensive cross-border settlement at scale. With hypothetical catalysts seemingly flashing 'bullish,' the bigger question for me is what the actual on-chain data is saying. On-Chain Metrics In my March article, I chose not to compare daily active addresses between XRP and top L1 smart contract chains like Solana or Ethereum because, frankly, the number for XRP is substantially lower and there are perhaps better historical peers. In the chart below, I'm showing XRP Ledger against Algorand ( ALGO-USD ) and Stellar ( XLM-USD ): 30 Day Active Addresses (CoinMetrics) The chart above shows the 10+ year trend in 30 day active addresses for all three chains mentioned above. During the 2022 spikes in usage, each of these chains had very similar levels of active users. However, more recently, the XRP Ledger has not been able to maintain the same level of average active user growth as the other two chains: Chain 30 Day Actives Fully Diluted Cap Ripple 54.9k $262.6b Stellar 174.6k $30b Algorand 130.8k $4.9b Sources: CoinMetrics, CoinMarketCap, as of 12/2/24 If we compare 30 day active users against the fully diluted market capitalizations for each of the three chains listed above, we can get a much better sense of what the market is paying for the level of users currently being served by the XRP Ledger. If we look at XRP based purely on value transferred, the spike in recent weeks is quite significant: 30 Day Average Transferred Value (CoinMetrics) At a 30-day average of $38.3 billion in transferred value, XRP is a large standout. It is currently averaging more daily transferred value than Bitcoin and Ethereum combined. However, even with this enormous move higher in transferred value, the fees paid to the XRP Ledger network are still well below top chains in the market like Bitcoin, Ethereum, or Solana. Consider, at $24k in fees on December 1st, XRP is trading at an annualized price to fees ratio of 29,977x fully diluted fees. For comparison's sake, Solana trades at 59x fully diluted fees and Ethereum trades at a 188 fully diluted P/F multiple. Risks In Chasing Here Elaborating on some of my points above, investors have to ask themselves what their valuation framework is and what they're willing to pay for any digital asset based on that valuation framework. My own framework may differ from what is generally accepted in the broader cryptocurrency market, but something that I think everyone in the space should be mindful of is the market value to realized value of these assets. This ratio shows the valuation the market is giving each token over what has actually been paid for those tokens on average. The more extreme this ratio gets to the upside, the greater the likelihood of a pullback. MVRV (CoinMetrics) The chart above shows the raw, unsmoothed MVRV for XRP, XLM, ALGO, BTC and ETH going back to the beginning of 2020. At a MVRV ratio of 2.66 on December 1st, XRP has the second highest MVRV ratio today of the assets shown (after only XLM) and is at the highest level XRP has traded since the 2.88 MVRV reading back in April 2021. This happened to coincide with when the price of the XRP token peaked during the last crypto bull cycle. Closing Takeaways The regulatory environment appears to be quickly improving for the US crypto industry. The report of impending NYDFS approval of RLUSD is also significant because the XRP Ledger has long been positioned as an alternative to the SWIFT system. But I believe these gains in the XRP token are more indicative of excitement from regulatory catalysts than anything else. The on-chain data doesn't justify this enormous price move in the XRP token, in my view. On one hand, transferred value has been surging. But on the other hand, what is the right price for a token that doesn't generate rewards from staking? At a fully diluted market capitalization of $262 billion, the market is implying XRP token is more valuable than Wells Fargo ( WFC ) and American Express ( AXP ). I can't say I think that's justified today. I should note that I do have indirect exposure to XRP through the Grayscale Digital Large Cap Fund ( GDLC ). That fund has a 4% allocation to XRP and is one of the only ways that I'm aware of to get exposure to XRP through a traditional brokerage account if one wishes to do so. I'm not going to call XRP a sell at this point, but I'm certainly not chasing this rally.
