XRP Outlook for 2023: Will a Ripple Victory or Regulatory Changes Drive Demand?

2022 was a particularly bearish year for XRP and the broader crypto market. In contrast to 2021, there were no new all-time highs for the crypto majors, including Bitcoin (BTC) and Ethereum (ETH).

While interest in NFTs waned, the metaverse and Web 3 continued to be an area of focus for mainstream players. Nonetheless, increased regulatory scrutiny from late 2021 continued throughout 2022, with the crypto market marred by the collapse of numerous crypto platforms.

The collapse of Terra Labs in May and the contagion followed by the demise of FTX left the crypto market in the deep red for the year. The fallout from the collapse of two marquee names was catastrophic, with bankruptcies and investor losses drawing condemnation from lawmakers and regulators.

As a result, the total crypto market cap slumped from a January high of $2,287 billion to a November low of $727.58 billion before steadying. At the time of press, the crypto market cap was down 64.8% to $772 billion.

Market conditions left BTC’s dominance at 40% in December, down from a 2021 January high of 71.89%. The slump reflected a shift in sentiment toward Proof-of-Work protocols, with US lawmakers targeting BTC in particular.

However, XRP fared better than some despite the SEC v Ripple case that has been ongoing since December 2020. According to CoinMarketCap, XRP ranks at number six, up from number seven in 2021. Despite the rise, XRP remains well below its pre-SEC lawsuit number three ranking.

While crypto market forces were bearish, surging inflation, the war in Ukraine, and Fed monetary policy added to the market angst.

XRP Moves in 2022

After a third consecutive monthly fall in January 2022, XRP struck a 2022 high of $0.9163 before succumbing to market forces and investor jitters over the SEC v Ripple case.

The collapse of Terra Labs sent XRP to a June low of $0.28748 before finding support. However, a return to $0.55 levels in September was brief.

XRP fell back to test buyers at $0.32 before steadying, the pullback coming in response to the collapse of FTX.

Despite uncertainty over the SEC v Ripple case, updates through the year continued to tilt the scales in favor of a Ripple victory, which cushioned the downside as the year-end approaches.

Year-to-date, XRP is down 56.7% to $0.3595, with the market cap at just $18.11 billion. In 2021, XRP had a market cap high of $81.47 billion before tumbling to below $15 billion in mid 2022.

What’s Next for XRP in 2023?

The XRP community faces a series of crypto market headwinds going into 2023. Undoubtedly, the key driver will be the outcome of the SEC v Ripple case. A Ripple victory or a settlement in the case would drive demand for XRP and likely bring the January 2018 ATM high of $3.35 into play.

Investors expect the case to reach its conclusion within Q1 2023. However, other factors could affect the longer-term outlook through Q4 2023.

An unwavering Federal Reserve that hikes interest rates through H1 2023 could bring about a hard landing. A hard landing would weigh heavily on the appetite for riskier assets. There is also the threat of a marked shift in the crypto regulatory landscape. A rigid regulatory framework may stifle an XRP breakout.

We, therefore, see a combination of events that will dictate direction throughout 2023.

A less hawkish Fed, a soft landing, crypto market regulations supporting innovation, and a Ripple victory could see XRP hit $5.00. On the flip side, XRP could fall back to sub-$0.20 in the event of an SEC victory, a hard landing, and crypto market regulations that stifle innovation and growth.

In order of ranking, the SEC v Ripple case will have the most influence. We would expect regulatory risk to have more impact than a global economic recession, based on the assumption that no other crypto platforms succumb to a liquidity crisis.