Author | Huo Huo
Produced by｜Baihua Blockchain
Since Trump won the US presidential election on November 5, a number of crypto assets, led by Bitcoin, have risen strongly, among which Ripple's XRP has performed even better. According to news on December 2, XRP surpassed Solana and Tether (USDT) to become the third largest crypto asset by market value, returning to the level before the SEC VS Ripple lawsuit in 2020.
Ripple was once considered to be a partner for the implementation of blockchain technology by many financial encryption institutions around the world and became famous. This is also one of the rare representative "footprints" of traditional "financial giants" participating in the wave of digital gold, blockchain, and PayFi technology. So, will Ripple be a "counterattack" by the financial giants this time?
01. Development History
Ripple's history can be traced back to 2004, when it was originally created by developer Ryan Fugger as a payment platform called RipplePay. The goal of RipplePay is to enable individuals and businesses to make payments in a peer-to-peer manner without a bank account. Ryan Fugger designed a trust-based credit system where users can directly conduct transactions or cross-border payments through trust in each other, without relying on intermediaries in the traditional banking system, thereby effectively reducing transaction costs.
In 2011, Jed McCaleb and Chris Larsen, who were both technical professionals, took over RipplePay and decided to develop it into a blockchain-based payment system. So, in 2012, they established OpenCoin to manage RipplePay, released the decentralized payment network protocol RippleNet and Token XRP based on the Ripple protocol, and began to promote XRP as a "bridge currency" for cross-border payments. With the development of the business, in order to better promote Ripple technology and payment networks, in 2015, OpenCoin was officially renamed Ripple Labs.
It is worth mentioning that Chris Larsen was a famous serial entrepreneur in Silicon Valley. In addition to Ripple, he also founded E-Loan and Prosper, both of which have achieved great success. Jed McCaleb was one of the founders of Mt. Gox, an early Bitcoin trading platform. Although Mt. Gox later closed down due to security vulnerabilities and funding problems, McCaleb's early experience provided him with a deep understanding of the crypto market and accumulated connections and reputation in the industry. Although he later left Ripple, he played a crucial role in its early development and helped Ripple build its core technology and ecosystem. The current CEO Bradley Garlinghouse has served as an executive at large companies such as AOL and Yahoo! and has extensive experience in financial technology and blockchain.
With the background of its founder and the advantage of early dividends, Ripple has received multiple rounds of investment support since its establishment, attracting the participation of many well-known venture capital institutions. Investors include Andreessen Horowitz, IDG Capital Partners, Valar Ventures, Lightspeed Venture Partners, etc. These investments provide Ripple with sufficient funds to promote its technology research and development and market expansion.
In terms of market development, Ripple is not only aimed at ordinary users, but also pays more attention to cooperation with traditional financial institutions. By 2013, Ripple was not only tried by some small financial institutions, but also cooperated with large financial institutions. By 2014, Ripple officially obtained multiple partners including cross-border payment companies such as IDT Corporation and Earthport, and also cooperated with many banks and financial institutions around the world (such as Western Union, Santander Bank of Spain, PNC, etc.), which changed the traditional cross-border payment model, making global payments more efficient and transparent, and making cross-border payments no longer dependent on the foreign exchange market.
It is particularly important to note that Ripple Labs has two products, one is the Ripple protocol that many banking institutions have cooperated with and adopted, and the other is the encrypted asset XRP. These two concepts are very easy to confuse. People often mistakenly believe that banks are adopting XRP assets on a large scale. In fact, the Ripple protocol adopted by banks is only a payment and settlement solution, and does not rely on the encrypted asset XRP. XRP assets are only an option when adopted. In general, the two projects of Ripple protocol and XRP are compatible with each other but independent of each other.
In 2018, Justin Sun also became Ripple's ambassador in China, responsible for promoting the promotion and application of Ripple and XRP in the Chinese market.
In 2014, OpenCoin, the predecessor of Ripple, was named one of the "50 Smartest Companies in the World" by MIT Technology Review. As time goes by, Ripple continues to strengthen its cooperation with global banks and payment institutions, gradually entering the mainstream financial circle, and this trend is also reflected in the price of XRP.
When XRP was first issued in 2012, the price was only a few cents. With the launch of the Ripple protocol and cooperation with some financial institutions, the price of XRP gradually increased between 2013 and 2014, reaching a maximum of about $0.10. At the end of 2017, driven by the bull market of the entire crypto market, XRP ushered in its first sharp rise. In particular, in December 2017, the price of XRP broke through $3 to set a record high, becoming the third largest crypto asset by market value at the time.
In 2018, as the market bubble burst, XRP prices fell back to around $0.50 and entered a relatively stable period until 2020 when the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Ripple, accusing it of failing to register XRP as a security. The case attracted widespread attention and became an important legal disturbance in the encryption industry. It also had a significant impact on the price of XRP, causing the price to drop.
Nevertheless, in 2021, with the overall market rebound and some court victories, the price of XRP once rebounded to around $1.80. After entering 2022, due to continued legal and regulatory challenges and unstable market sentiment, the price of XRP remained below $0.50 for most of the time. In 2023, Ripple once again won a partial victory in the lawsuit, and the market's confidence in XRP was restored, and the price rose to around $0.90.
However, affected by multiple factors such as market sentiment, Ripple's business expansion and the progress of legal proceedings, the price of XRP will stabilize between US$0.70 and US$1.00 before November 2024, which is far from its peak.
After the rising market in November, on December 2, XRP's market value surpassed USDT to become the third largest crypto asset by market value, returning to the level before the SEC VS Ripple lawsuit. So what factors have driven people's renewed interest in XRP?
02. Factors behind the rise
1) Turnaround in Ripple’s lawsuit against the SEC
The most direct factor for the rise of XRP comes from the key progress in the more than four years of difficult litigation between Ripple and the SEC.
Because since 2020, the lawsuit between Ripple and the SEC has been the main obstacle to the rise in XRP prices. On December 22, 2020, the SEC formally filed a lawsuit against Ripple and its founders Bradley Garlinghouse and Christian A. Larsen, alleging that since 2013, Ripple and its founders have made profits of approximately $1.38 billion by selling XRP, and XRP is an unregistered security, violating the registration requirements of federal securities laws. Ripple insists that its actions are legal and continues to defend itself in the lawsuit. Although the lawsuit continues, under pressure from the SEC, during this period, several mainstream trading platforms such as Coinbase and Binance US announced the delisting of XRP transactions.
However, recent case and market developments suggest that the Ripple case is expected to be properly resolved.
We know that SEC Chairman Gensler's strict regulatory policies in recent years have put many crypto projects in trouble, and he has been called the "public enemy of crypto." 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 long-standing legal dispute between Ripple and the SEC is expected to be resolved.
According to Bitcoin.com on December 2, Chris Giancarlo, former chairman of the U.S. Commodity Futures Trading Commission (CFTC), said that under the leadership of a crypto-friendly government, the SEC may withdraw its lawsuit against Ripple. He believes that the Trump administration may shift to a more pro-crypto policy, and the SEC will also review its regulatory stance on crypto assets, including the identification of XRP. Giancarlo also wrote a legal analysis report arguing that XRP should not be considered a security and has been advocating for greater regulatory transparency and a lenient treatment of digital assets.
Earlier (The Washington Post) reported that Trump's advisory team is evaluating multiple candidates, including some officials and financial executives who openly support the crypto industry. It is worth mentioning that Chris Giancarlo is regarded as a popular candidate for the position of "Crypto Czar" in the Trump administration.
There is no doubt that the market is predicting that the new SEC leadership may take a more relaxed and supportive attitude towards the crypto industry, thus bringing new opportunities to XRP and other projects that have been under regulatory pressure. It can be foreseen that if the new chairman promotes policy changes, Ripple's lawsuit may be settled or withdrawn, and the regulatory environment of the entire crypto industry may also change. This will be a major policy benefit for Ripple, Binance, Coinbase and other projects that have been suppressed. Under this positive influence, the price of XRP rebounded strongly, with a single-day increase of more than 35%, setting a new high in nearly three years.
2) The Trump administration is friendly to crypto development
The 2024 US presidential election has come to an end, with Republican candidate Donald Trump elected as the next president. During the campaign, Trump promised to make the United States the "global cryptocurrency capital" and strongly support the crypto industry. For details, please refer to the previous article: (Breaking: Trump wins, Bitcoin welcomes the most friendly US government). This news has brought a huge confidence boost to the market, taking the lead in driving up the prices of crypto assets led by Bitcoin, causing Bitcoin to sprint to the $100,000 mark.
And on November 14, it was announced that President Trump wants to eliminate all capital gains taxes on cryptocurrencies issued by US companies. This news would make all profits earned by ADA, ALGO, HBAR, and XRP completely tax-free since their creators are all US companies.
It can be said that the improvement of the regulatory environment has become a major positive factor for XRP's turnaround. With the overall market trend, the prices of mainstream crypto assets such as Bitcoin and Ethereum have risen, and the crypto market has entered a new round of bull market cycle. As one of the oldest crypto assets with a high market value, XRP has naturally become one of the focuses of capital attention.
3) Ripple’s own development potential
Over the past few decades, the global financial payment system has been dominated by traditional bank settlement and payment methods. Although these systems have advantages in stability and security, with the acceleration of globalization and the booming development of e-commerce, traditional payment systems have gradually exposed many problems: high transaction fees, slow payment processing speeds, and the complexity and high costs of cross-border payments have become bottlenecks restricting global financial liquidity and market development.
XRP and XRP Ledger (decentralized ledger) launched by Ripple, unlike Bitcoin and Ethereum which rely on proof of work (PoW) or proof of stake (PoS), XRP uses the Ripple Protocol Consensus Algorithm (RPCA). The algorithm reaches consensus through a group of independent verification nodes to ensure fast and effective verification of transactions. This enables the XRP network to complete transaction verification within a few seconds, greatly improving the speed of transactions and reducing costs. XRP is essentially a bridge currency that can exchange between different legal currencies efficiently and at low cost, providing a smoother path for global payments and cross-border settlements.
With its innovative technical architecture and unique business model, Ripple has become an important force in promoting the innovation of traditional financial payment systems and expanding the Web3 field. It has established in-depth cooperative relationships with more than 100 banks and financial institutions around the world, including well-known institutions such as Santander Bank and Mitsubishi Bank. These collaborations have not only enhanced Ripple's influence in the traditional financial field, but also provided more practical application scenarios for XRP. At the same time, Ripple cooperates with platforms such as Archax to actively promote the tokenization of real-world assets (RWA) and help traditional financial assets smoothly enter the blockchain ecosystem. In addition, Ripple is also actively deploying in the field of "institutional-level DeFi". By cooperating with platforms such as OpenEden and investing in projects such as tokenized government bonds, it has opened up new opportunities for further cooperation with financial institutions.
Therefore, Ripple has practical use value and demand in areas such as cross-border payments and liquidity management.
Recently, asset management companies such as 21Shares and Bitwise Asset Management have submitted XRP ETF proposals to apply for XRP ETF, which further verifies Ripple's strategic advantages in integrating Web3 with traditional finance.
In addition, according to CoinDesk, Ripple Labs has invested $25 million in the crypto industry's Fairshake Political Action Committee (PAC) to compete for seats on the crypto industry advisory committee that Trump plans to establish, influence the 2026 U.S. congressional elections, and promote more friendly crypto regulatory policies. Ripple's move marks the company's beginning to use political means to try to reverse its litigation dilemma with the SEC through policy reforms and strive for a more favorable legal and regulatory environment for XRP.
The New York Department of Financial Services has hinted to payment company Ripple (closely associated with XRP) that it will approve the company’s magical RLUSD stablecoin, Fox Business reported on November 30. If approved, Ripple will be able to legally offer RLUSD to the public.
There are also unconfirmed reports that Elon Musk may invest heavily in Ripple and XRP, which may have further fueled the market's excitement. Although this rumor remains speculation, it may have played a role in driving the bullish momentum of XRP.
03. Risk Warning
Although XRP has performed well in the recent period, its future trend still needs to be viewed rationally.
1) Centralization Issue
The first is the controversial initial token distribution of XRP. Of the total supply of XRP of 100 billion, more than half is controlled by Ripple Labs.
Secondly, unlike fully decentralized blockchains such as Bitcoin and Ethereum, Ripple Labs plays a central role in the development, maintenance, and support of XRP Ledger. This dependency makes XRP Ledger subject to the decisions of Ripple Labs to some extent.
In addition, Ripple Labs has established partnerships with many traditional financial institutions and central banks, which typically have centralized structures.
2) Leverage bubble risk
XRP's violent rise has brought its price to its highest level since 2021. Analysts have warned that the rise may be "leverage-driven," and open interest in XRP derivatives has reached a record level, warning investors to pay attention to potential volatility. Because historical patterns show that a rapid increase in open interest often leads to a sudden market adjustment.
3) Confusion between the Ripple protocol and XRP
As mentioned above, many people completely confuse 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 has created a strong background for XRP assets, confusing the two may lead to misjudgment in the overall assessment.
04. Summary
As one of the pioneers in the blockchain field, XRP has been focusing on cross-border payment scenarios since its launch in 2012. It has been favored by financial institutions for its high efficiency, low cost and technological innovation. However, in the past 12 years, XRP's growth has not been smooth sailing. It has faced pressure from market competition and has been frustrated by regulatory disputes. As a "veteran" in the field of cryptocurrency, can XRP successfully open up an innovative track in the future? Time will tell.
