For investors willing to take a chance on a high-risk, high-reward crypto priced under $1, one of the best options is XRP (XRP -2.40%). Currently ranked fifth among all cryptos with a market capitalization of $33 billion, XRP is up more than 80% for the year.
Even with its recent sizzling performance, though, XRP still trades for the bargain basement price of just $0.62. Can XRP nearly double in value and decisively break through the $1 mark? Let's take a closer look.
Regulatory drama
First, we need to talk about the elephant in the room: the long-running courtroom drama involving XRP and the SEC. Since December 2020, the SEC has been attempting to classify XRP as an unregistered security. That's why many crypto investors have been patiently holding onto their XRP, awaiting a final resolution to this drama. The thinking here is that if XRP finally wins its legal case outright, it could double, triple, or even quadruple in value. Some super-bullish predictions have XRP skyrocketing to $10.
And certainly, there is some precedent for this type of thinking. In July, XRP won a huge legal victory in the case, and its price nearly doubled overnight, from $0.47 to $0.95. So, the potential certainly exists for some explosive returns.
But here's the thing: This SEC case does not seem to be going away anytime soon. As exciting as things might look for XRP right now, does anyone really think the SEC is going to back down? After all, the XRP case is one of the high-profile cases that could determine the SEC's ability to regulate crypto in the future.
Moreover, even if there is a legal settlement in this case, it might not be what XRP investors are hoping for. The latest rumor -- promptly denied by XRP backers -- is that the SEC might require XRP to accept a settlement of $770 million to make its regulatory problems go away.
Future growth prospects
Next, we need to consider XRP's future growth prospects, which are tied to the development of the Ripple payment network. This is a decentralized blockchain platform for sending money across borders quickly and cheaply, all powered by the XRP crypto token.
Three years ago, this Ripple payment network was a big deal, and it looked like it might begin to play a bigger role in the global financial system. Along the way, XRP gained several high-profile partners and backers in the financial sector.
Image source: Getty Images.
But there's no doubt the ongoing regulatory drama has slowed growth in the XRP ecosystem, especially in the U.S. market. According to top executives at Ripple Labs (the company behind the XRP crypto token), it might cost upwards of $200 million to defend itself against the SEC. And if there's a huge settlement on top of that, it could be a crippling blow. That's almost $1 billion that could have been used for technological innovation instead of paying lawyers.
Granted, XRP might still pull this off because novel use cases continue to emerge for the Ripple payment network. For example, new plans call for Ripple (and, hence, XRP) to be used in the establishment of Central Bank Digital Currencies (CBDCs). That could be huge for future growth as long as you buy into the idea of central banks issuing digital money.
What's next for XRP?
If you take a long-term perspective, then it's highly likely that XRP will push through the $1 mark at some point. But it could take a lot longer than people think. As long as there's no resolution in the SEC case, then the price of XRP could continue to trade below $1 for the foreseeable future. Some executives at Ripple have talked about eventually taking their case to the U.S. Supreme Court, and if that happens, then this thing could drag on for years.
That being said, it's best to think of XRP as a potential winning lottery ticket and not a core component of your portfolio. If you already have a position in XRP, then I would continue to hold, hoping for the big lottery win. But if you are simply looking for a high-risk, high-reward crypto with explosive upside potential, then there are far better prospects available.
