Ripple's cryptocurrency, XRP, has witnessed an astonishing surge in recent months. It has seen a remarkable increase of over 300% within a single month and has risen nearly 1,000% from its level of $0.22 in early 2021 to reach $2.37 currently. This remarkable growth has propelled XRP to become the world's fourth-largest cryptocurrency, with a market capitalization of around $135 billion, following Bitcoin, Ethereum, and Tether. The recent rally has been nothing short of extraordinary.

Unprecedented Growth of Ripple's XRP in a Changing Crypto Landscape

Donald Trump's Impact on Cryptocurrencies

The surge in XRP mirrors the broader trend seen across the cryptocurrency market after Donald Trump won the U.S. presidential elections. There was a surge in hope that the new administration would adopt a friendly stance towards digital currencies, which sparked an unprecedented interest in them. In one of his rallies, Trump even expressed his intention to make the U.S. the "crypto capital" of the world. This sentiment led to Bitcoin crossing the $100,000 mark for the first time ever, more than doubling from its level of $44,000 at the beginning of the year. Ripple, as a digital payment network using XRP to facilitate fast and low-cost international money transfers, has also been significantly affected by these developments.

Back in 2020, the U.S. SEC alleged that Ripple raised more than $1.3 billion in 2013 by selling XRP in an unregistered security offering to investors. However, Ripple firmly stated that XRP should not be treated as a security. In 2023, the court made a mixed ruling. It stated that XRP was not a security when sold to the public on an exchange and did not violate federal securities laws. But it also ruled that XRP is a security if sold to institutional investors. This led to the SEC seeking a $2 billion fine against Ripple, but the court imposed a $125 million penalty instead. A few months ago, a judge denied the SEC's motion to appeal the ruling.

Earlier this month, a group of state attorneys general and the DeFi Education Fund sued the SEC, alleging unconstitutional overreach. The regulator was accused of exceeding its regulatory obligations by initiating enforcement actions against digital asset exchanges. This legal battle has added another layer of complexity to the already volatile cryptocurrency market.

The Future of XRP and the SEC

Currently, the chair of the SEC, Gary Gensler, is set to step down on January 20, 2025. There is a possibility that the new person taking over will be more crypto-friendly. One of the possible candidates is Paul Atkins, who is likely to be seen favorably by crypto advocates. There is a chance that the SEC may drop the entire case against Ripple, which would be another positive development for XRP.

Overall, XRP has had a remarkable couple of months, and with the potential changes in the SEC, this breakout could mark the beginning of a much larger rally. A key driver of XRP's growth is likely to be the impending launch of the RLUSD stablecoin. The RLUSD is currently awaiting approval and, as a stablecoin, will be fully backed by cash in the form of USD, government treasury securities, and other cash equivalents.

XRP's Performance Compared to Other Markets

Although XRP has seen a stellar 1000% rise since early 2021, its returns have not been consistent. In 2021, returns for XRP were 278%, but in 2022, it saw a decline of -59%. In 2023, it rebounded with an 81% increase. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023. This indicates that XRP underperformed the S&P in 2022.

Consistently beating the broader markets, both in good times and bad, has been a challenge for individual stocks and even cryptocurrencies in recent years. In contrast, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year over the same period. This is because, as a group, the HQ Portfolio stocks provided better returns with less risk compared to the benchmark index. There was less of a roller-coaster ride, as evident in the performance metrics of the HQ Portfolio.