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Is Ripple (XRP) a millionaire maker?
This small cryptocurrency still faces regulatory, competitive and macroeconomic challenges.
XRP (XRP 2.75%), the native cryptocurrency of the Ripple payment protocol network, reached its all-time high of $3.84 on January 4, 2018. This represented a huge gain of nearly 40,000% over the previous 12 months.
But today, XRP is trading at around $0.50. Like many smaller altcoins, XRP has lost its luster as rising interest rates have cooled the cryptocurrency market. It has also faced tougher regulatory and competitive hurdles than many other cryptocurrencies. But could XRP recover in the next few years and turn a $10,000 investment into over $1 million?
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XRP’s biggest tailwinds and headwinds
In 2012, a start-up called Opencoin (later renamed Ripple Labs) launched Ripple as a payment protocol network to settle real-time gross payments, remittance payments, and currency exchange transactions. It routed Ripple transactions through its own blockchain-based ledger and said it can provide secure, instant and “nearly free” global financial transactions of any size with no chargebacks.
Today, financial institutions such as Travelex Bank, Tranglo, and Sentbe use Ripple’s payment protocol network. However, Ripple’s XRP cryptocurrency has not been as widely adopted for payments as Bitcoin (Bitcoin 6.18%) or Ether (ET 3.92%).
Ripple was considered an innovative way to process payments a decade ago, but now faces stiff competition from similar blockchain-based networks like Ethereum, which hosts a wider range of decentralized apps and tokens; AND Solana (SOL 4.32%), which processes transactions at a faster pace with lower fees.
Meanwhile, the US Securities and Exchange (SEC) sued Ripple and two of its executives in late 2020 for raising $1.3 billion through an XRP token offering. The SEC claims the offering was an illegal sale of unregistered securities.
Last July, a US judge ruled that XRP tokens were not in fact unregistered securities, and the SEC subsequently dropped its lawsuit against the two Ripple executives. However, a final trial between the SEC and Ripple began at the end of April, which is expected to continue for a few more months before a final decision is reached. This uncertain outcome will likely remain the biggest near-term headwind for XRP this year.
High interest rates remain the other major headwind for XRP and most other cryptocurrencies in the coming months. Many cryptocurrencies rallied earlier this year as investors expected the Federal Reserve to gradually cut interest rates, but hotter-than-expected inflation reports dampened those hopes.
Could XRP generate millions in earnings in a few years?
If the price of According to Digital Coin Price estimates, XRP could revisit that record high by 2030. Cryptonewsz.com is even more optimistic: it believes that XRP will rise to $9.81 by 2030, which would turn an investment of $10,000 more than $196,000.
But for XRP to turn a $10,000 investment into over $1 million, it would need to generate a 100 bagger gain. Even the most bullish forecasts fall short of those expectations. Last June, cryptocurrency hedge fund manager Thomas Kralow said that the price of $10,000 into $600,000. However, many critics scoffed at Kralow’s $30 price target, as it would have increased XRP’s market capitalization to $3 trillion, more than double the combined value of all other cryptocurrencies in the market.
The price of new blockchain networks such as Ethereum and Solana.
Therefore, it seems doubtful that XRP will generate multimillion-dollar earnings by the end of the decade. But I think it could easily double, triple, or even quadruple if it gets a definitive legal victory against the SEC and the Fed cuts interest rates. In other words, it could still be a promising long-term trade for investors who can withstand all the short-term volatility.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin, Ethereum, Solana and XRP. The Motley Fool has a disclosure policy.