Why Ripple (XRP) is rising today

The XRP (XRP 4.61%) the cryptocurrency, often known as Ripple, rose as much as 6.5% Thursday morning. By 11:45 a.m. ET, the digital currency was trading 4.4% above its price since Wednesday’s traditional market-closing bell. XRP surged as a familiar fund manager announced the formation of a mutual fund focused on holding XRP tokens.

Grayscale’s history with crypto funds

The fund manager in question is Grayscale, a veteran in managing mutual funds and exchange-traded funds (ETFs) in the cryptocurrency sector. The Grayscale Bitcoin Trust ETF (GBTC 0.81%) was launched as a mutual fund in 2015, and Grayscale Ethereum Trust (ETHE -0.08%) it came three years later. Both funds were converted to ETFs in 2024, as the US Securities and Exchange Commission (SEC) finally allowed spot price crypto ETFs to be created.

Today, the firm established an XRP trust, which is currently only available to accredited investment professionals. The fund should become available to retail investors over time, followed by quarterly management reports to the SEC and then an ETF conversion. This is Grayscale’s published lifecycle for crypto funds, and its XRP product is just the beginning.

However, every step along this path should make this cryptocurrency more readily available to different types of investors, so the bullish market reaction this morning makes sense.

A small step forward and a long way to go

Grayscale XRP Trust has a long way to go before evolving into a proper ETF. The Grayscale Solana Trustfor example, it has been idle at the “public listing” stage for more than a year. And the firm is yet to file financial reports with the SEC about this fund, which is based on a larger and more popular cryptocurrency. XRP is probably low on Grayscale’s priority list.

These early cryptocurrencies come with the usual Grayscale baggage. Ethereum and XRP funds have annual expense ratios of 2.5%, well above the average expense ratio of 0.25% for Ethereum or Bitcoin ETFs.

The company is doing important work paving the way for XRP-based ETF filings from all long-term comers, but it also wants a sizable chunk of early investors’ potential returns. This is good news in a general sense, but I don’t want to add the Grayscale XRP fund to my own portfolio. A modest direct investment in XRP is good enough for now, may be followed by low-fee XRP ETFs in my IRA someday.