Since Trump won the U.S. presidential election on November 5, a number of crypto assets led by Bitcoin have surged strongly, with Ripple's XRP showing even more outstanding performance. According to news on December 2, XRP surpassed Solana and Tether (USDT) to become the third-largest crypto asset by market capitalization, returning to the level before the SEC vs. Ripple lawsuit in 2020.
Ripple was once considered a prominent partner for the implementation of blockchain technology among many global financial crypto institutions, making it a rare representative 'footprint' of traditional 'financial giants' participating in the wave of digital gold, blockchain, and PayFi technology. Will this time be a 'counterattack' from financial giants against Ripple?
01
Development history
The history of Ripple's establishment can be traced back to 2004, initially created by developer Ryan Fugger as a payment platform called RipplePay. The goal of RipplePay was to enable individuals and businesses to make payments in a peer-to-peer manner without the need for bank accounts. Ryan Fugger designed a trust-based credit system that allowed users to transact or make cross-border payments directly through mutual trust, eliminating the reliance on intermediaries in traditional banking systems, thus effectively reducing transaction costs.
In 2011, tech-savvy Jed McCaleb and Chris Larsen took over RipplePay and decided to develop it into a blockchain-based payment system. In 2012, they founded OpenCoin to manage RipplePay, releasing the decentralized payment network protocol RippleNet based on the Ripple protocol and the Token XRP, and began promoting XRP as a 'bridge currency' for cross-border payments. As the business grew, in 2015, OpenCoin officially changed its name to Ripple Labs to better promote Ripple technology and the payment network.
It is worth mentioning that Chris Larsen was a well-known serial entrepreneur in Silicon Valley; in addition to Ripple, he founded E-Loan and Prosper, both of which achieved great success. Jed McCaleb was one of the co-founders of the early Bitcoin trading platform Mt. Gox. Although Mt. Gox later collapsed due to security vulnerabilities and financial issues, McCaleb's early experiences provided him with deep insights into the crypto market, and he built connections and reputation within the industry. Although he later left Ripple, he played a crucial role in its early development, helping Ripple build its core technology and ecosystem. The current CEO, Bradley Garlinghouse, previously held executive positions at large companies like AOL and Yahoo!, and has extensive experience in the fintech and blockchain fields.
With its founders' backgrounds and early advantages, Ripple has received multiple rounds of investment support since its establishment, attracting participation from many well-known venture capital firms. Investors include Andreessen Horowitz, IDG Capital Partners, Valar Ventures, and Lightspeed Venture Partners. These investments provided Ripple with ample capital to drive its technology development and market expansion.
In terms of market development, Ripple focuses not only on ordinary users but also emphasizes collaboration with traditional financial institutions. By 2013, Ripple was not only trialed by some small financial institutions but also collaborated with large financial institutions. By 2014, Ripple officially partnered with multiple cross-border payment companies, including IDT Corporation and Earthport, and collaborated with several global banks and financial institutions (such as Western Union, Banco Santander in Spain, and PNC), changing the traditional cross-border payment model, making global payments more efficient and transparent, and eliminating reliance on foreign exchange markets.
02
Factors behind the rise
1) Turning point in the Ripple vs. SEC lawsuit
The most direct factor behind the rise of XRP is the key progress in Ripple's difficult litigation with the SEC over the past four years.
Since 2020, the lawsuit between Ripple and the SEC has been a major obstacle to the rise in XRP's price. On December 22, 2020, the SEC formally sued Ripple and its founders, Bradley Garlinghouse and Christian A. Larsen, alleging that since 2013, Ripple and its founders had profited approximately $1.38 billion from the sale of XRP, claiming that XRP was an unregistered security that violated federal securities registration requirements. Ripple insists that its actions are legal and continues to defend itself in the lawsuit. Despite the ongoing litigation, under pressure from the SEC, several mainstream trading platforms such as Coinbase and Binance US announced the delisting of XRP trading during this period.
However, recent developments in the case and the market indicate that the Ripple case is likely to be resolved satisfactorily.
We know that SEC Chairman Gary Gensler's strict regulatory policies in recent years have plunged many crypto projects into trouble, earning him the title of 'crypto enemy.' However, with the news that Gensler will step down in January 2025, the market's expectations for a more friendly regulatory environment have been ignited. More importantly, this also means that the protracted legal dispute between Ripple and the SEC is likely to see a resolution.
2) The Trump administration has a friendly attitude towards crypto development
After the 2024 U.S. presidential election concluded, Republican candidate Donald Trump was elected as the next president. During the campaign, Trump promised to make the U.S. the 'global cryptocurrency capital' and strongly supported the crypto industry, as referenced in earlier articles: (Breaking: Trump wins, Bitcoin welcomes the most friendly U.S. government). This news brought significant confidence to the market, leading to a surge in prices for crypto assets, led by Bitcoin, pushing Bitcoin towards the $100,000 mark.
Moreover, on November 14, there were reports that President Trump wanted to eliminate all capital gains taxes on cryptocurrencies issued by U.S. companies, which would make all profits gained by ADA, ALGO, HBAR, and XRP completely tax-free, as their creators are all U.S. companies.
It can be said that improvements in the regulatory environment have become a major positive factor for XRP's turnaround. As the overall market trend drives the rise in prices of mainstream crypto assets like Bitcoin and Ethereum, the crypto market has entered a new bull market cycle. As one of the leading crypto assets by market capitalization, XRP naturally becomes a focal point for capital attention.
3) The development potential of Ripple itself
03
Risk warning
Although XRP has performed well recently, its future trajectory still needs to be viewed rationally.
1) Centralization issues
First, the initial token distribution of XRP is controversial. Of the total supply of 100 billion XRP, more than half is controlled by Ripple Labs.
Secondly, unlike completely decentralized blockchains like Bitcoin and Ethereum, Ripple Labs plays a core role in the development, maintenance, and support of the XRP Ledger. This dependency means that the XRP Ledger is somewhat constrained by Ripple Labs' decisions.
Additionally, Ripple Labs has established partnerships with many traditional financial institutions and central banks, which typically have centralized structures.
2) Leverage bubble risk
The sharp rise of XRP has driven its price to the highest level since 2021. Analysts warn that this surge may be 'leverage-driven,' as the open interest in XRP derivatives has reached record levels, cautioning investors to be aware of potential volatility. Historical patterns indicate that a rapid increase in open interest often leads to sudden market adjustments.
3) Confusion between the Ripple protocol and XRP
As mentioned earlier, many people completely conflate the large-scale adoption of the Ripple protocol by financial institutions with the large-scale adoption of XRP assets. The two are compatible but independent of each other. Although the Ripple protocol creates a strong background for XRP assets, confusing the two could lead to misjudgments in overall assessments.
04
Summary
As one of the pioneers in the blockchain field, XRP has focused on cross-border payment scenarios since its launch in 2012, favored by financial institutions for its efficiency, low cost, and technological innovation. However, the growth path of XRP over the past 12 years has not been smooth, facing pressure from market competition and frequent setbacks due to regulatory disputes. As an 'old hand' in the cryptocurrency field, whether XRP can successfully carve out an innovative path in the future remains to be seen.
