XRP (CRYPTO: XRP) finds itself at the center of a valuation debate as 2026 approaches. Bulls argue the token trades well below its real value. They point to Ripple’s On-Demand Liquidity network processing $1.3 billion in cross-border transactions, partnerships with more than 300 banks and payment firms, over $1 billion in ETF inflows within five weeks, and exchange supplies dropping 45% in two months. They see a path to $5 as institutions continue buying and supply tightens.
Bears counter that XRP’s large circulating supply of approximately 57 billion tokens makes extreme price targets mathematically challenging. They also note that many banks use Ripple’s payment networks without holding XRP—adoption of the technology doesn’t automatically mean demand for the token. Let’s weigh the evidence to help you decide if XRP is undervalued or priced fairly.
5 Reasons XRP Is the Most Undervalued Crypto in 2026
The question of whether XRP is undervalued has become a favorite among value-oriented crypto investors. Several data points support the idea that current prices don’t reflect XRP’s fundamentals.
Market Cap vs Real-World Throughput
Investors often assess XRP by comparing its market cap to its real-world utility. Ripple’s network processed about $1.3 billion in cross-border payments during the second quarter of 2025. In contrast, XRP’s market capitalization is approximately $113 billion at $2 per token.
Here’s the argument: if XRP processed $1.3 billion in just one quarter, that’s over $5 billion annually. For comparison, payment processors like PayPal have market caps 10-20x their annual transaction volume. Q2 2025 transactions of $1.3 billion represent 41% year-over-year growth.
If this pace continues, XRP could process $6-7 billion annually by late 2026. Value investors see this trajectory as justification for re-rating from $2 toward $5 or higher, especially as more corridors come online.
Institutional Demand via XRP ETFs
Institutional demand adds another layer. The launch of U.S. spot XRP ETFs in November 2025 created a regulated channel for large investors. In the first four weeks, these ETFs attracted roughly $1 billion in net inflows.
The money flowing into these products isn’t speculative trading volume—it represents long-term allocations from pension funds and asset managers. As they lock up tokens in custody accounts, they remove them from the market. This structure establishes a stable bid that supports the price and signals institutional confidence in XRP’s future role.
Shrinking Exchange Supply
Scarcity can emerge even without a hard supply cap. Evidence shows XRP supply on exchanges is shrinking dramatically. Over just two months, XRP exchange balances fell from 3.95 billion tokens to 2.6 billion—a 45% decline. This happened as ETFs launched and whales moved tokens into cold storage—offline wallets for long-term holding.
When available inventory contracts while demand grows, prices tend to rise. This supply squeeze resembles what happened to Bitcoin following the approval of spot ETFs. As ETF flows continue, remaining XRP on exchanges may become scarce—and value-focused investors see tight supply as a catalyst for higher valuations.
Large Holder Accumulation
Large holders reinforce the scarcity argument. Between September and November 2025, whales absorbed about 340 million XRP tokens—roughly 0.6% of circulating supply or $680 million at $2 per token. This wasn’t panic buying during a rally—it happened during consolidation between $1.90-$2.20, showing strategic accumulation.
On-chain data shows these tokens moved from trading platforms into long-term custody. Whales targeted support levels around $1.90-$2.20, buying during dips. Their buying reduces the liquid supply and signals conviction that current prices understate future value. For value investors, whale accumulation shows that sophisticated players expect better days ahead.
Sentiment Lag After Legal Clarity
Regulatory clarity and network adoption also shape the undervaluation thesis. The Securities and Exchange Commission settled its case against Ripple in August 2025, with XRP sales on secondary markets deemed non-securities. This decision removed a cloud that had hung over the asset for years, paving the way for regulated products and alleviated compliance teams’ concerns.
Meanwhile, more than 300 financial institutions now use Ripple’s technology for settlement, and XRP’s ledger processes approximately 2 million transactions per day. This adoption shows that banks and payment providers trust the infrastructure. When real-world use grows alongside clearer rules, the argument for undervaluation becomes more compelling.
The Case Against XRP: Why It Might Be Fairly Valued at $2
Skeptics point out several reasons why XRP’s undervaluation arguments might be wishful thinking. The counterarguments focus on utility, supply, and competition.
RippleNet Doesn’t Require XRP
Many banks use Ripple’s technology without touching XRP. The payment network includes xCurrent and xVia—systems that allow banks to settle cross-border transfers in seconds using Ripple’s messaging protocol but without the token.
Only the On-Demand Liquidity (ODL) product uses XRP as a bridge currency. While Ripple reports that ODL volume grew 41% year-over-year to $1.3 billion quarterly, this represents a small fraction of RippleNet’s total messaging volume, which includes transactions that never touch XRP. Major institutions like American Express, Santander, and Bank of America rely on RippleNet’s messaging but avoid XRP.
This means Ripple’s success doesn’t automatically translate into token demand, so price expectations tied to network adoption may be misplaced.
Large Token Supply
The second point concerns supply. XRP has a large token supply: approximately 57 billion units are currently in circulation, with a hard cap of 100 billion. This quantity makes extreme price targets mathematically challenging.
For example, a price of $1,000 would give XRP a market capitalization of $57 trillion—more than twice the U.S. economy’s $27 trillion GDP. Even Bitcoin at its peak market cap sits far below that level. Supply caps constrain potential price appreciation, making $5 or perhaps $10 by the end of the decade plausible upper bounds.
Regulatory and Competitive Pressures
Regulatory risk remains another concern. While the SEC settled its case against Ripple, many jurisdictions are still drafting regulations for tokenized assets. Banks won’t commit to using XRP at scale until they know how regulators worldwide will treat it.
Meanwhile, competition is intensifying. Central bank digital currencies (CBDCs)—government-backed digital money—and stablecoins could provide cheaper liquidity options for cross-border payments. If large banks adopt state-backed tokens or USD-backed stablecoins for settlement, the demand for XRP could stagnate.
Is XRP Undervalued Or Just Priced Out?
The big question remains: Is XRP undervalued? The bullish argument notes significant transaction volumes ($1.3 billion quarterly), institutional inflows ($1 billion in ETFs within four weeks), shrinking exchange supply (45% drop in two months), and improved regulatory clarity (SEC settlement in August 2025). These points support the idea that XRP could be undervalued heading into 2026, with a potential path to $5 if adoption accelerates.
The bearish view emphasizes that RippleNet usage doesn’t guarantee token demand—many banks use the messaging system without XRP. Supply is large at 57 billion tokens, making extreme price targets mathematically challenging. Regulatory and competitive risks persist, especially from CBDCs and stablecoins.
In a balanced perspective, XRP could be undervalued if institutional adoption through ETFs continues and ODL usage expands significantly. However, the market may already be pricing in both potential and risk at $2. Whether XRP reaches $5 depends on factors outside investor control: bank adoption decisions, regulatory developments globally, and whether XRP remains the preferred bridge currency as competition intensifies.
Investors must weigh these factors and decide for themselves if XRP fits into a value-oriented strategy. The undervaluation thesis has merit, but so do the counterarguments about supply and utility limitations.
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