XRP News Today: XRP Lags Behind Bitcoin, Ethereum With 9% Gain, Analyst Blames High Token Velocity

XRP, a prominent cryptocurrency, has shown moderate gains in recent weeks but continues to lag behind other major cryptocurrencies such as Bitcoin and Ethereum. This underperformance has sparked renewed analysis within the community, with one XRP-focused commentator suggesting that token velocity could be a key factor behind the asset’s sluggish price movement.

Bitcoin and Ethereum have seen significant returns over the past month, with Bitcoin gaining approximately 17% and Ethereum rising nearly 50%. In contrast, XRP has only recorded a 9% uptick and remains confined to the lower $2 range. This limited progress has frustrated some XRP holders, especially after the sharp price surge seen between November 2024 and January 2025.

Token velocity, an economic metric that measures how frequently a digital asset changes hands over a specific period, is believed to be a significant factor in XRP’s price stagnation. The analyst from the “All Things XRP” account on X argues that many investors are unfamiliar with this concept and its impact on the token’s market behavior. Token velocity is calculated by dividing the total transaction volume by the circulating supply. A high velocity suggests active trading, while a lower value indicates that holders are more inclined to retain their tokens.

The analyst posits that a higher velocity exerts downward pressure on price due to frequent selling activity. When more holders are willing to retain their tokens, supply becomes constrained, which can support upward price movement. XRP’s design, which prioritizes speed and cost-efficiency for cross-border payments, contributes directly to its high velocity. Institutions using Ripple’s solutions, such as banks and remittance providers, typically purchase XRP to process transactions and then sell it shortly after. This transactional behavior differs from Bitcoin, which is often viewed as a long-term investment, or Ethereum, which benefits from staking and decentralized finance activity that encourages holding. By contrast, XRP’s use in rapid payment settlements keeps it in continuous circulation.

Adding to this dynamic are periodic token releases from Ripple’s escrow, which further increase the circulating supply and sustain high transaction volumes. To address this challenge, the analyst proposed several ideas aimed at decreasing token velocity and encouraging longer-term holding. One approach involves implementing staking rewards on the XRP Ledger, which would provide holders with incentives to lock up their tokens, reducing market supply and potentially supporting price increases. However, the analyst emphasized that staking alone may not be sufficient. He pointed to the tokenization of real-world assets, such as property, commodities, and private equity, as a more impactful development. By using XRP in tokenization processes that require extended holding periods, velocity could be reduced, thereby enhancing scarcity and potentially driving price appreciation.

The analyst also cautioned against the assumption that XRP’s role in payments alone will significantly increase its value. While the asset performs well in transaction processing, he argued that broader adoption through tokenization would provide a more sustainable and scalable source of demand. This approach could help XRP achieve greater price stability and growth, aligning it more closely with the performance of other major cryptocurrencies.