XRP rallied nearly 500% last November after many years of underperformance relative to other cryptocurrencies, boosted by a changing political climate and greater regulatory clarity. Since then, XRP has mostly range-traded and moved roughly in line with other crypto assets such as bitcoin (BTC), ether (ETH) and solana (SOL) (Figure 1).
Figure 1: XRP has been among the recent outperformers among crypto assets
XRP is the cryptocurrency and native asset of the XRP ledger (XRPL), a public blockchain focused on faster and most cost-effective global payment systems. Like the other crypto currencies, it has its own unique set of economic characteristics. For starters, unlike BTC, ETH and SOL, which are continuously created, all 100 billion XRP tokens that will ever exist were pre-mined in 2012. Twenty percent was initially owned by the founders, while 80% was gifted to Ripple Inc., which later created an escrow system which releases up to 12 billion annually. However, not all of the available coins are sold. As such, the annual drawdown of the reserve of tokens is closer to 3-4 billion with 8-9 billion locked back into escrow. Currently, around 38 billion XRP are held in escrow. If the recent pace of token sales were to continue, available tokens in escrow would eventually diminish to zero somewhere around 2035-2038, at which point XRP could become scarce and, depending on future demand conditions, perhaps much pricier.
On the demand side, XRP is used mainly by banks and other financial institutions looking to faster, less expensive ways of bridging fiat currencies. This contrasts with BTC, which is held mainly as a store of value as well as ETH and SOL, which are mainly used in relation to decentralized finance (DeFi) apps, non-fungible tokens (NFTs) and Web3 development.
Compared to bitcoin, whose blockchain can handle only around seven transactions per second, or ETH, which handles around 15, XRP’s blockchain can handle 1,500 transactions per second, nearly as many as SOL. As such, it takes only four to five seconds for trades to settle on the XRP and SOL blockchains as compared to one to five minutes on ETH and 10 to 60 minutes on BTC.
Table 1: Comparing and contrasting the four most widely used crypto assets
| Crypto Asset | Ripple (XRP) | Bitcoin (BTC) | Solana (SOL) | Ethereum (ETH) |
|---|---|---|---|---|
| Consensus | Unique node list validators validate transactions; escrow-based release. | Proof of Work (PoW) | Proof of History (PoH) + Proof of Stake (PoS) | PoS (Since Ethereum 2.0) |
| Creation Process | 100 billion tokens Pre-Mined | Mining rewards | Staking rewards | Staking rewards |
| Speed in Transactions per Second (TPS) | ~ 1500 | ~7 | Claims 65000 but usually closer to 2000 to 4000 | Claims 30000 but closer to 15. |
| Finality Time | ~ 4 seconds | 10 to 60 minutes | ~ 5 seconds | 1 to 5 minutes |
| Energy Use | Low | High (energy intensive) | Low | Lower (after 2022 PoW to PoS switch) |
| Use case / Value Proposition | Cross-border payments, especially for financial institutions such as banks seeking to bridge fiat currencies efficiently | Digital gold/store of value/decentralized currency. Valued for security and scarcity, | High performance decentralized apps & DeFi similar to ETH but with with faster throughput and lower cost. | Smart contracts, centralized applications (DeFi, NFTs, Web3 development) |
| Coin Cap | 100 billion tokens Pre-Mined | 21 million | No cap | No cap |
| Money Supply Growth Mechanism | Supply limited to 100 billion pre-mined tokens of which 80 billion were gifted to Ripple Labs which periodically releases the coins though sales geared towards maintaining market stability. No new XRP can be mined. Currently Ripple holds 38 billion coins in escrow of which 12 billion are offered onto the market each year. | Currently more than 19 million of bitcoin exist and money supply growth has slowed to 1.5% per annum following the latest quadrennial halving in April 2024. | Decreasing issuance to incentivize network participation an security. Coin creation was 8% initiialy and decreases 15% per year, aiming for a long-term rate of 1.5%. Currently solana money supply growth stands at 4.69%) | Ethereum can theoretically grow by up to 18 million coins annually but in reality it has never exceeded 5-6 million new coins per annum. |
Source: Investopedia XRP, Bitcoin, Ether and Solana
Volatility and Correlation
Like other crypto assets, XRP can be subject to volatile movements. Its rolling three-month annualized volatility has varied from 40% to 140% since January 2024, roughly in line with SOL and ETH and typically a bit higher than BTC (Figure 2).
Figure 2: XRP volatility has generally mirrored that of other crypto currencies
Among the various crypto assets BTC and ETH have the strongest correlation, close to +0.8 in recent years. BTC and SOL, and ETH and SOL correlations are slightly weaker, typically around +0.6 to +0.8 and have been rising recently. By contrast, XRP shows more of an independent streak correlating with the other crypto assets at close to +0.4 to +0.6 in recent years (Figure 3):
Figure 3: XRP has been less correlated to other crypto assets than BTC, ETH and SOL
All four have been positively correlated with the Nasdaq 100 since 2020 but XRP-Nasdaq correlations have usually been weaker than ETH, SOL or BTC (Figure 4). This may be because XRP is more focused on fintech than on pure web development. That said, XRP also has a lower correlation with financial stocks than its crypto peers (Figure 5).
Figure 4: XRP has usually been more weakly correlated to the tech-heavy Nasdaq 100
Figure 5: XRP also shows a weaker correlation to financial stocks than BTC, ETH and SOL
To some extent, crypto assets have also been viewed as an alternative to the U.S. dollar and as a complement to gold. All four crypto assets had a negative correlation with USD until very recently when that correlation came back towards zero (Figure 6). That may be because in April, equities crypto assets and the U.S. dollar fell simultaneously as tariffs ramped up and then rebounded as higher tariffs were rescinded or postponed.
Figure 6: Until recently crypto assets often showed a negative correlation to USD
Finally, all four crypto assets have exhibited a weak positive correlation to gold. This suggests that some investors may view crypto currencies in general, not just bitcoin, as alternatives or a complement to gold: assets that central banks cannot print, and potential long-term inflation hedges.
Figure 7: Crypto assets often have a weak positive correlation with gold
Bottom Line
- XRP investors enjoyed a 500% post-presidential election rally in November as regulatory uncertainty abated
- XRP’s blockchain is nearly as fast as SOL’s in completing trades
- XRP is focused on facilitating cross-border payments and bridging fiat currencies
- XRP is more weakly correlated to BTC, ETH and SOL than they are to one another
- Likewise XRP has weaker correlations to both financial and tech stocks as well as to USD and gold
- Unlike BTC, SOL and ETH, which have a continuous process for creating new coins, all 100 billion XRP tokens were pre-mined
- Currently, there are 38 billion XRP tokens held in escrow
- The number of coins held in escrow could decline to zero between 2035 and 2038, at which time XRP could come to more closely resemble bitcoin with extremely limited supplies
Trading XRP
Our XRP and Micro XRP contracts offer a cost-effective way to gain exposure to the price of XRP.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
