Ripple’s stablecoin, RLUSD, just reached a market capitalization of $1.56 billion, up from just $132 million at this time last year. By any measure, the stablecoin has been a resounding success since its launch in December 2024.
This is great news for Ripple, the company behind XRP, but it’s a problem for investors in the cryptocurrency.
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I understand why XRP holders might be excited about adopting RLUSD. Ripple’s growth is Ripple’s growth, right? More products should mean a larger ecosystem, and a rising tide lifts all boats.
But I think that misunderstands the situation.
XRP’s main value proposition has always been its role as a “bridge asset”, providing liquidity into Ripple’s payment product, formerly known as On-Demand Liquidity (ODL). Before RLUSD, when a bank sent US dollars to euros in France, Ripple converted the dollars to XRP and then converted them back to euros. XRP was the middle step, and it still can be, but so can RLUSD.
And as a dollar-pegged stablecoin, it is exactly that: stable, and stability is what banks are looking for. They tend to avoid dealing with volatile assets as much as possible.
This makes RLUSD an obvious choice for most financial institutions looking to use Ripple’s liquidity product, and the more institutions opt for RLUSD, the fewer they will opt for XRP.
Ripple knows that banks want stability and has pivoted hard to push RLUSD as the leading bridge asset. The company spent $200 million to acquire stablecoin payments company RAIL, and its website now highlights “integrate stablecoin payments into your business,” not “use XRP for faster transfers.” Ripple clearly appears to be building its future around stablecoin infrastructure, while XRP is on the sidelines.
I’ve been saying for a while that the fundamental bullish thesis (that adoption of Ripple’s technology will drive demand for XRP) was already wrong. The fact is that most banks do not need Ripple’s liquidity features and only use their messaging technology, which does not involve XRP at all.
But there was at least some demand pressure from the smaller subset of institutions that did want liquidity. That is now being undermined by Ripple itself. The more RLUSD is adopted, the less XRP will be needed.