If valuing cryptocurrencies sometimes feels like holding a stethoscope to the weather, there is thankfully a steadier pulse to listen for, and it's compounding utility with compounding trust. Assets that become more useful for serious financial institutions, and more trusted by their risk teams, tend to earn higher and more resilient valuations over time. That, in a nutshell, is the road ahead for XRP (XRP 1.01%).

But, with the coin's price rising by about 700% during the past three years alone, reaching more than $3 as of Aug. 18, it's reasonable to have some doubts about whether it's overvalued. Let's unpack the drivers of its valuation a bit more to figure it out.

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The legal, regulatory, and institutional moats are getting wider

Ripple, the business that issues XRP, is skilled at developing relationships with regulators, as well as with institutional investors.

Most importantly, the legal fog that dogged Ripple for years has now lifted. In early August, the U.S. Securities and Exchange Commission (SEC) ended its lawsuit against Ripple over the company's allegedly unauthorized security issuance, closing a major regulatory overhang on the company's core payments business. Other crypto asset issuers could still be vulnerable to similar lawsuits, depending on the exact nature of their line of business.

Second, Ripple has been doing the unglamorous work of earning regulatory trust abroad, thereby increasing XRP's total addressable market (TAM) as a financial tool. Its Singapore subsidiary has held a Major Payments Institution license from the Monetary Authority of Singapore (MAS) since 2023, a credibility marker in a region where fintech diligence is exacting. It's also making headway with regulatory authorities in other key global financial hubs, like Dubai, where XRP will be used as part of the city's real estate tokenization project.

Furthermore, on the financial institutions front, in 2023 the company acquired Metaco, a crypto custody vendor whose tooling is used by large banks, signaling comfort with meeting their compliance requirements. Then in mid-2024, it also closed the purchase of Standard Custody, a similar business, bringing a limited-purpose trust charter under the Ripple umbrella, which is the exact license traditional finance prefers to see with digital assets services providers.

Taken together, these moves replace what would otherwise be a tenuous marketing story with a well-grounded and consistent narrative about increasing legitimacy among regulators and key target customers alike. And that makes it a bit less likely to be overvalued, as there are now real, rare, and hard-to-develop pillars to support its valuation.

There's not too much hype to be worried about here

Institutional investors need compliant money transfer rails, predictable asset controls, and minimal integration friction from a tech perspective.

The XRP Ledger (XRPL) meets that moment with protocol-level compliance features many asset issuers want. It doesn't use bespoke middleware so much as baked-in guardrails that users will find to be lower-friction for adoption into their workflows. Its competitors largely don't have that.

Still, there is rising competition from other networks courting the same customers, including chains with richer decentralized finance (DeFi) tooling today. But the investment thesis is not that XRP needs to become all things to all users.

The thesis here is that Ripple's actions so far give its target users fewer reasons to say no, which usually leads to more durable demand.

In that sense, much of its value is linked to its consistent de-risking as an asset for its target audience, with another large proportion of its value stemming from the development of the chain's underlying technology, and most of the rest coming from the large amount of liquidity it has to offer on its chain.

In other words, its valuation is derived from its accomplishment of difficult things and the retention of key resources, which unambiguously make it a more valuable platform than the alternatives.

With that in mind, assuming regulatory clarity holds, good relations with regulators and institutions continue to grow, and the number of institutional integrations compound, XRP does not look overvalued at all.