In the final two months of 2024, XRP (CRYPTO: XRP) was one of the best-performing cryptocurrencies in the world. In that period, XRP skyrocketed from a price of $0.50 to $2 for a mind-boggling gain of 300%. While other major cryptocurrencies also surged in the post-election period, XRP was a clear standout.

Will XRP be able to repeat that same kind of performance in 2025? It will be difficult to do so, but here are three reasons why XRP has the potential to become the best performer of this year, too.

Pro-crypto regulatory outlook

By far, the leading factor in XRP's stratospheric rise has been a complete 180-degree reversal in U.S. crypto policy. The new Trump administration has pledged a pro-business approach to crypto regulation, and thus far, has been good to its word. The key step, of course, was the appointment of cryptocurrency advocate Paul Atkins as the new head of the Securities and Exchange Commission (SEC), replacing Gary Gensler.

That's important because the SEC has had an axe to grind with Ripple, the company behind the XRP token, for more than four years now. Back in December 2020, the SEC claimed that XRP was a security and that it was improperly launched. That has led to endless litigation, filled with a confusing back-and-forth of appeals, counter-appeals and counter-counter-appeals.

In mid-2023, Ripple executives acknowledged that over $200 million might be spent on litigation to settle the case. Even after Ripple agreed to pay $125 million in penalties last year, the case is still not over.

So the thinking here is that a pro-crypto SEC is going to put an end to this case once and for all in 2025. And that's what could lead to stratospheric new gains for the XRP token. Clearing the air of regulatory uncertainty will make it possible for Ripple to get back to business as usual. Case in point: Ripple already says it is hiring domestically again after years in which its U.S-.based business was very much in doubt.

New ETFs on the way

Even better, lifting the regulatory cloud around Ripple is going to make it much easier for investors to invest in XRP. And the way they are going to do that is via new spot exchange-traded funds (ETFs). As a result, a number of different investment firms have already filed spot XRP ETF applications with the SEC, hopeful of gaining access to all that pent-up demand.

The current thinking is that new spot XRP ETFs could be available sometime by mid-year. Once they become available, that will likely lead to a new surge of investor money into XRP. According to JPMorgan Chase, as much as $8 billion in new money could flow into XRP.

In a best-case scenario, all of this new money flowing into XRP could lead to a new all-time high above $4. Given XRP's current price of $2.50, that's a 60% gain. So keep your eyes on the ETF application process. Once one ETF gets approved, it's likely that all of them will get approved, as we saw with the spot ETFs for Bitcoin and Ethereum.

XRP as a strategic reserve asset?

Right now, there's a tremendous amount of hype and speculation about XRP. In one potential scenario, Ripple will file for a tech initial public offering (IPO) and then use the proceeds to put even more resources behind the Ripple payment network (which is powered by the XRP token).

As a result of all this positive sentiment, some investors are already predicting that XRP could hit a high of $15 in 2025. That's another 500% gain on top of the 400% gains we've already seen over the past three months!

However, investors need to keep their expectations in check. The SEC case has yet to be fully resolved. And it's not really clear how much institutional demand there is for an XRP ETF. Yes, retail investors are having a love affair with XRP right now, but what about big institutional investors like pension funds and endowments?

So here's my prediction: XRP will be the best performer of the year if it becomes one of the cryptocurrencies added to the proposed U.S. strategic reserve of digital assets. Right now, Ripple's supporters are lobbying hard for XRP to be included alongside heavyweights such as Bitcoin and Ethereum. In fact, Ripple CEO Brad Garlinghouse had a discussion with President Trump in January in the hopes of convincing him to consider XRP as a reserve asset.

A seal of approval from the U.S. government would give the green light to institutional investors around the world to start accumulating, and that could set off an unprecedented buying frenzy for XRP. If that happens, XRP could outperform even the most bullish of expectations.

JPMorgan Chase is an advertising partner of Motley Fool Money. Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, JPMorgan Chase and XRP. The Motley Fool has a disclosure policy.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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