XRP News Today: XRP's Value Boosted by Transaction Fees, Bridge Currency Role, and Institutional Interest

The Bitwise report on XRP highlights three key factors that drive the value of the cryptocurrency: transaction fees and burning, spam prevention via reserve requirements, and XRP’s role as a bridge currency and liquidity reserve. The report emphasizes that every transaction on the XRP Ledger incurs a small fee of approximately 0.00001 XRP, which is permanently removed from circulation. As of January 2025, over 13.46 million XRP have been burned, reducing the total supply to around 99.99 billion. Bitwise argues that this burn mechanism becomes significantly more impactful at scale, potentially influencing long-term valuation. For instance, a 100x increase in transaction volume would lead to the removal of 0.75% of the total XRP supply annually.

All XRP Ledger accounts must maintain a base reserve of 1 XRP to deter spam. Additionally, each token transaction requires a separate 0.2 XRP reserve. This reserve was initially set to 20 XRP, then dropped to 10 XRP, but was reduced to 1 XRP in late 2024 to allow more investors to engage with the ecosystem while maintaining its protection. However, Bitwise notes that this mechanism does not contribute significantly to demand. With only 6.1 million active accounts, the total XRP locked for reserve purposes, if the number of accounts increased a hundredfold, would be 610 million, less than 1% of the total supply. The reserve requirement is framed as a network safeguard rather than a primary value driver.

The most consequential factor discussed in the report is XRP’s potential role as a bridge currency within a large and expanding ecosystem. Bitwise points out that XRP can facilitate currency-to-currency and currency-to-asset transfers across borders. While research into this use case is ongoing, they maintain that bridging is likely more important than often acknowledged. Should XRP gain broader adoption for these purposes, it would lead to significant in-ecosystem XRP holdings and reinforce its value proposition.

The Bitwise report also highlights that the value of XRP is driven by its utility within the XRP Ledger and the broader Ripple ecosystem. The XRP Ledger's efficiency and low transaction costs make it an attractive option for cross-border payments and remittances, which in turn drives demand for XRP. The strategic accumulation of XRP by large holders, or "whales," is a significant factor in driving the price of XRP. On-chain data shows that wallets holding between 1 million and 10 million XRP have increased their holdings, now controlling 9.44% of the total supply. This uptick from 8.24% in January suggests that large holders are confident in the long-term prospects of XRP and are accumulating the token strategically. This accumulation can lead to a reduction in the available supply of XRP, which can drive up the price.

Ripple, the company behind XRP, has also been making strategic moves to strengthen the token's position in the market. The company has announced that it will discontinue its eight-year tradition of publishing quarterly market reports. Ripple emphasized that it will continue to share updates via official channels and noted that institutional interest in XRP is growing. In Q1, XRP-based investment products attracted $37.7 million in inflows, nearly matching Ethereum’s $214 million year-to-date. Ripple also highlighted major institutional developments, including Franklin Templeton’s filing for a spot XRP ETF and CME Group’s launch of XRP futures. These initiatives suggest deepening ties between XRP and institutional finance.

Ripple’s latest quarterly report revealed it now directly holds 4.56 billion XRP, a 1.7% increase from the previous quarter. The company still controls around 37.1 billion XRP in escrow, unlocking one billion tokens each month, though some are relocked, helping manage market supply and XRP value. In addition to acquiring the brokerage firm Hidden Road for $1.25 billion, Ripple is reportedly exploring a potential purchase of Circle, the issuer of the USDC stablecoin. Such a move would significantly expand Ripple’s presence in the stablecoin sector and enhance its role in digital finance.

Despite these positive developments, the price of XRP remains subject to various factors, including geopolitical uncertainty and market sentiment. The upcoming US-China trade talks and the Federal Reserve's decision on interest rates are two key events that could influence the price of XRP. Investors are closely watching these developments, as they could affect global risk appetite and asset prices, including digital currencies like XRP.