Crypto ETFs are on the rise. Yet, for the XRP and Cardano communities, the wait could extend further. A recent GSR study reveals lackluster scores for both assets, suggesting that the likelihood of seeing XRP and Cardano ETFs approved in the near future remains low. This analysis, based on rigorous decentralization and demand criteria, reveals significant structural weaknesses that hamper their ETF potential.
Barriers to ETF Approval for XRP and Cardano
The recent release of the ETF Probability Score by GSR highlights the challenges facing cryptos XRP and Cardano. The assessment focuses on two main axes: decentralization and demand, each playing a very important role in the viability of an ETF.
Decentralization is a complex concept that encompasses permissionless participation, development control, token distribution, and hardware diversity. For XRP and Cardano, the decentralization scores are particularly low, with a -0.9 for XRP and -0.1 for Cardano, placing them last and fifth, respectively, among the cryptocurrencies evaluated. These scores indicate structural vulnerabilities that could compromise their ability to provide the security and resilience necessary for an ETF.
Meanwhile, demand is measured by metrics such as market cap, trading volume, and community activity. Here again, XRP and Cardano perform poorly with scores of -0.2 and -0.5, ranking fourth and sixth. These low demand scores for these two cryptos reflect market dynamics and community appeal that are not robust enough to support the creation of an ETF at this stage.
Strengthening decentralization and demand: A necessary step
GSR’s ETF Likelihood Score gives decentralization a 33% weighting and demand a 67% weighting. And the results from their study highlight cryptos like Ethereum, Solana, and NEAR, which significantly outperform XRP and Cardano on these criteria, and highlight a higher likelihood of ETF approval for these more established and in-demand assets. However, this doesn’t mean that the situation is set in stone.
Decentralization, while complex to improve, remains an area where progress is possible. For XRP and Cardano, increasing permissionless participation, better distribution of crypto, and increasing diversification of hardware used to secure the network could strengthen their positions. Projects aimed at increasing decentralization must be supported by clear policies and concrete actions to gain the trust of regulators and investors.
On the demand front, an increase in market capitalization, higher trading volume for both cryptos, and increased community activity are key. These can be driven by technological innovations, strategic partnerships, and wider adoption of their respective platforms. Active engagement with the community and creation of real-world use cases can also play a significant role in improving demand.
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