For one brief moment this summer, it looked like XRP (XRP +0.70%) was about to go parabolic. In the span of just 24 hours, XRP doubled in price from $0.47 to $0.95. Immediately, the consensus in the crypto world was that XRP was about to soar past the $1 mark.
However, that never happened. Within a month, XRP had given up all those gains and currently trades for just $0.62. Hope springs eternal, of course, so some investors are now predicting that XRP could rally in 2024. So, should you buy XRP while it's still below $1 in the hopes of participating in this rally?
Market underperformance
Admittedly, XRP is up an impressive 85% for the year. That's right on par with the performance of Ethereum (ETH +0.47%), which is up 87% for the year. But it badly lags the performance of crypto leader Bitcoin (BTC +0.32%), which is up 155% for the year. And it is nowhere close to the performance of sizzling altcoin Solana (SOL +1.50%), which is now up 594% for the year.
CRYPTO: XRP
Key Data Points
Moreover, if you zoom out and take a big-picture view of XRP's performance over the past five years, it's not very impressive. Even during the very peak of the last crypto bull market rally, XRP only managed to hit a high of $1.41. At the same time, of course, Bitcoin was cruising to an all-time high of $69,000.
Going even further back in time, the all-time high for XRP is just $3.84, and that occurred back in January 2018. That's why I'm puzzled as to why so many investors are convinced that XRP is destined to double, triple, or even quadruple in price sometime in the near future. For the past 18 months, XRP has basically traded in a very narrow range between $0.40 and $1, with signs of a possible breakout scattered throughout.
XRP vs. the SEC
There's a good reason why XRP has been locked in such a narrow trading range for so long: the company behind the XRP crypto token (Ripple Labs) has been involved in a bruising court battle with the SEC since December 2020. For nearly three years, the SEC has been attempting to classify XRP as a "security," and that has created an enormous regulatory cloud around XRP.
Image source: Getty Images.
Quite simply, nobody really knows what's going to happen next with the SEC. Earlier this year, XRP won a major legal battle, and it looked like the scales of justice had tipped in XRP's favor. That's why XRP briefly doubled in price in mid-July. But now there's growing concern that this legal battle could persist well into 2024 and perhaps even beyond. So, XRP continues to trade in a very narrow range as investors await more news.
Meanwhile, XRP continues to chew through vast sums of cash to defend itself against the SEC. According to executives from Ripple Labs, the total legal cost of defending itself against the SEC could top $200 million. That's money that should have gone into the development of the Ripple network, which is the blockchain-based payment platform powered by the XRP crypto token.
The ultimate bullish scenario for XRP
The bull case scenario calls for XRP to win its legal battle against the SEC in 2024. That would enable Ripple Labs to build out the Ripple payment network and create more use cases for the XRP crypto token. At the same time, the removal of all the regulatory uncertainty around XRP would enable it to regain the trust of partners within the financial world. Basically, it would be business as usual once again.
On top of all that, say XRP backers, there might even be an IPO for Ripple Labs. Any new capital infusion from the IPO would trigger further growth in the XRP ecosystem, which in turn could bring a sky-high valuation for the XRP crypto token. In this scenario, say some analysts, XRP might soar to $10.
What's the probability of a breakout?
But just how likely is that? That's my primary concern about investing in XRP -- you're basically making a highly speculative bet that it will emerge victorious in its battle with the SEC. And you're then making a second highly speculative bet that XRP can once again hit the ground running with all of its plans for developing the Ripple payment network.
From my perspective, there are far better options out there if you would like to invest in a speculative, high-risk crypto token. Solana, for example, looks much more attractive than XRP right now. Thus, for now, I cannot recommend investing in XRP.
