Is XRP Undervalued or Merely Priced in Line with Its Fundamental Utility?

The question of whether XRP is undervalued hinges on a nuanced interplay of institutional adoption, supply dynamics, and real-world transaction volume relative to its market capitalization. As the cryptocurrency market navigates macroeconomic headwinds and evolving regulatory clarity, XRP's trajectory in 2025 offers a compelling case study for investors seeking to reconcile fundamentals with price action.

Institutional Adoption: A Catalyst for Long-Term Value

XRP's institutional adoption has accelerated in 2025, driven by strategic partnerships and infrastructure developments. Ripple's minority stake in TJM Investments, a U.S.-regulated brokerage, underscores its commitment to institutional-grade trading capabilities. This collaboration enables XRP to be traded and cleared under traditional financial regulations via Ripple Prime, a critical step in attracting institutional capital. Meanwhile, Doppler Finance and SBI Ripple Asia's joint development of XRP-based yield products signals a shift from payments-focused utility to diversified financial applications, aligning with broader institutional demand for regulated crypto assets.

The rise of U.S. spot XRP ETFs further amplifies this trend. These funds have attracted $1.2 billion in assets within weeks, reflecting unprecedented institutional adoption in crypto history. However, the price of XRP has remained stagnant near $1.90, despite this influx. Analysts attribute this disconnect to hedging strategies by Authorized Participants (APs), who short XRP futures to manage ETF supply, and profit-taking by early investors leveraging ETF liquidity to exit positions. While these factors temporarily suppress price momentum, the underlying institutional infrastructure-such as abrdn's tokenized U.S. dollar money market fund on the XRP Ledger-suggests a foundation for long-term value creation.

Supply Dynamics: Controlled Emissions and Exchange Liquidity

XRP's fixed supply of 100 billion coins, with approximately 59 billion in circulation as of late 2025, creates a deflationary framework. This controlled supply dynamic is reinforced by ETF inflows, which have reduced exchange-held XRP by 45% over two months. The shrinking liquidity pool could theoretically drive upward price pressure, yet macroeconomic factors-including geopolitical tensions and risk-averse sentiment-have dampened bullish momentum.

Ripple's On-Demand Liquidity (ODL), which processed $1.3 billion in cross-border transactions in Q2 2025, further illustrates the token's utility. However, the broader market cap of $178 billion appears modest relative to the scale of real-world adoption. For context, the XRP Ledger processed over four billion transactions by December 2025, with daily active sender addresses surging by 447,200 in Q3 2025. These metrics suggest that XRP's utility extends beyond speculative trading, yet its market valuation has not fully capitalized on this growth.

Real-World Volume vs. Market Cap: A Case for Undervaluation?

The disconnect between XRP's transaction volume and market cap raises questions about its pricing. With XRP's $1.3 billion in cross-border payments processed via ODL and 1.8 million daily transactions on the XRP Ledger according to metrics, the token's utility in real-world applications is robust. Yet, its market cap lags behind peers like Bitcoin and Ethereum, despite institutional-grade infrastructure and ETF-driven demand.

This undervaluation could be temporary. A Monte Carlo simulation predicts a 60% probability of XRP trading between $1.04 and $3.40 by December 31, 2026, with a most likely price of $2.50. Optimistic scenarios, however, suggest potential for $5.90 or higher if adoption accelerates. The key variable is whether institutional inflows and real-world usage can overcome macroeconomic headwinds and speculative profit-taking.

Conclusion: A Balancing Act

XRP's valuation appears to straddle two realities: a fundamentals-driven narrative of institutional adoption and controlled supply, and a market-driven reality of macroeconomic pressures and speculative dynamics. While ETF inflows and real-world transaction volume signal strong utility, the price has yet to reflect this in a meaningful way. For investors, the question is not merely whether XRP is undervalued, but whether the market is pricing in its long-term potential or short-term volatility. As Ripple continues to expand its institutional footprint and diversify XRP's use cases, the token's valuation may eventually align with its fundamentals-assuming macroeconomic conditions stabilize and adoption gains momentum.