What Really Drives XRP's Value: It's Not Payment Volume

XRP's value is often questioned due to its unique design, which allows it to be reused every few seconds. This raises the question of what drives its price if nobody holds onto it for long periods.

The answer lies in how XRP works inside a payment, where banks buy and sell the token quickly, using it only for a few seconds before releasing it back into circulation. The speed at which XRP settles payments is its biggest selling point, but this also means that holding onto the coin exposes users to price swings.

The pool of coins actively moving money through the system is far smaller than the total value flowing through, and XRP can be busy without many people needing to hold it. This is evident in the XRP Ledger's current state, where one million payments made by AI agents have been processed this month, yet new wallet creation has fallen to its lowest since November 2024.

The price of XRP is not driven by payment usage but rather by how many people hold the coin. The wider crypto cycle and supply leaving the open market are key drivers of the token's price. Spot XRP ETFs, market makers, and exchanges all contribute to pulling XRP off the market and driving up its price.

Ripple's ecosystem is building new reasons for people to hold XRP, including the proposed lending vaults that would allow holders to lock their coins into fixed-term loans. The XLS-66 amendment aims to introduce this feature, which could give XRP its first built-in reason to sit still and earn.