Should you buy XRP (Ripple) before January 20?

In 2020, the US Securities and Exchange Commission (SEC) sued a company called Ripple, alleging that it violated the law because of the way it issued its XRP (XRP 8.57%) cryptocurrency. The two parties were locked in a fierce legal battle until it was partially resolved in 2024, but it’s not officially over yet (more on that in a moment).

XRP has a market cap of more than $150 billion as of this writing, making it the world’s third most valuable cryptocurrency. But it was worth a mere fraction of that just a few months ago – the token has risen more than 400% since Donald Trump’s US election victory on November 5.

Trump is forming what could be the most pro-crypto administration in US history, so investors are speculating that Ripple’s regulatory woes may soon disappear. Does this mean you should buy XRP before the new president-elect takes office on January 20th?

XRP is designed for the Ripple Payments network

The global banking system is complex and not all institutions use the same infrastructure to process transactions. Some major banks use the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network to transfer money to each other, but many do not, which can cause delays in settling transactions.

Ripple designed the Ripple Payments network to solve that problem. It standardizes payment protocols so that banks can “talk” to each other even if they use different infrastructure. In short, they can use Ripple Payments to eliminate middlemen and settle transactions with each other directly – and instantly.

Ripple launched the XRP cryptocurrency to standardize these transactions. For example, a US bank can send XRP to a Korean bank instead of sending US dollars to avoid currency exchange costs and other transaction fees. The two banks can then convert their XRP to a fiat currency of their choice.

This means that unlike most cryptocurrencies, XRP has a real use case that can support its value in the long term.

Why has Ripple faced so much scrutiny from the SEC?

There are 100 billion XRP tokens in existence. About 57 billion circulate in the market where they can trade on crypto exchanges. The other 43 billion tokens are owned by Ripple, which releases small amounts each month to meet institutional demand.

Therefore, XRP is very different from a decentralized cryptocurrency such as Bitcoinwhich has a fixed supply ceiling and is not controlled by any company or individual.

This is among the reasons why the SEC sued Ripple in 2020, arguing that XRP should be classified as a financial security (like a stock or bond). Issuers of securities must register them and operate under a strict set of rules, so this lawsuit had serious consequences for Ripple’s business.

However, in August 2024, a judge ruled that XRP can only be a security under specific circumstances, such as when Ripple issues new tokens to institutions. However, XRP may not be a security when used in transactions or when traded on crypto exchanges. Ripple’s punishment was a $125 million fine, which investors saw as a victory — but the SEC is appealing the ruling, leaving the company to face years in court.

That’s why XRP skyrocketed after Trump’s election victory. The president-elect has already nominated Paul Atkins to lead the SEC (pending Senate approval). Atkins co-chairs an organization called the Token Alliance, which is an advocate for the crypto industry, so he’s a big supporter of digital assets.

Under Atkins’ leadership, it is possible that Ripple’s battle with the SEC could come to a swift end after January 20th.

Image source: Getty Images.

Should you buy XRP before January 20th?

Banks and financial institutions do not have to use the XRP token to use the Ripple Payments network. They can also trade in fiat currencies while retaining the advantage of instant settlements. This means that the success of Ripple Payments does not necessarily translate into a higher value for XRP.

Therefore, while a friendlier SEC will almost certainly benefit Ripple, it may not drive XRP up as much as investors think. After all, despite its recent surge, the token still hasn’t surpassed its 2018 all-time high of $3.40.

It is entirely possible that XRP could continue to rise through 2025 based on positive investor sentiment alone. Having a pro-crypto US government in office will be a powerful thing, especially if it brings new initiatives to benefit the industry. However, further upside in XRP will specifically be driven by speculation, which is not a recipe for sustainable long-term value.

Remember, XRP dropped more than 90% after its peak in 2018, and there is nothing stopping it from happening again. As a result, while the token could move higher from here, I don’t think it will be a safe investment before or after January 20th.