XRP (XRP -3.24%), the native cryptocurrency of the Ripple payment protocol network, has taken investors on a wild ride since its debut in August 2013. If you had invested $1,000 in XRP on its first trading day at just $0.0058893 per token, your stake would have grown to $652,030 when it reached its all-time high of $3.84 on Jan. 4, 2018.
But today, XRP trades at about $0.62, so your investment would have shrunk back to about $105,276. That's still a mind-boggling gain of more than 100-fold in a little more than a decade, but could XRP head even higher over the next few years?
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What sets XRP apart from other cryptocurrencies?
Back in 2012, Opencoin (rebranded as Ripple Labs in 2015) launched its Ripple blockchain network for handling gross payment settlements, currency exchanges, and remittance payments in real time. It was designed to facilitate "secure, instant, and nearly free global financial transactions of any size with no chargebacks." It subsequently pre-mined 100 billion XRP tokens to serve as the platform's native cryptocurrency. Just over half of those tokens are in circulation, while most of the remaining tokens are locked in an escrow account to ensure the market's supply remains stable.
XRP didn't gain much attention until the rise of Bitcoin (BTC -2.41%) and Ethereum (ETH -1.03%) drew more mainstream investors to the crypto market. Since XRP was already pre-mined, the bulls promoted it as a more environmentally friendly and energy-efficient alternative to the other two.
XRP's relatively extended history and support from Ripple's established payment platform -- which already serves a growing number of financial customers like Travelex Bank, Tranglo, and Sentbe -- also made it seem like a safer play than many of the altcoins on the market. It's currently the world's sixth-largest cryptocurrency, with a market cap of $35 billion.
What's keeping XRP below a dollar?
For successful cryptocurrencies like Bitcoin and Ethereum, rising above $1 marked the major inflection point in their long-term rallies. However, XRP dropped below $1 in late 2021 and has remained under that threshold for three reasons.
First, the U.S. Securities and Exchange Commission (SEC) sued Ripple Labs and two of its executives in December 2020 for raising $1.3 billion through an offering of XRP tokens. The SEC claims those tokens should have been classified as securities, and therefor registered with the agency in compliance with securities regulations. The SEC subsequently dropped the cases against Ripple's individual executives, but the overall case against Ripple hasn't been resolved yet. In July 2023, U.S. District Judge Analisa Torres ruled that Ripple's XRP tokens had more in common with a foreign currency than an unregistered security. Torres subsequently rejected a request by the SEC to appeal that ruling in October, but the SEC still hasn't given up on cracking down on Ripple yet.
Second, Ripple faces fierce competition from similar blockchain-driven platforms like Ethereum and Solana (SOL -5.99%). Ethereum serves a broader range of markets than Ripple, which mainly serves financial institutions, while Solana processes its blockchain transactions at a much faster rate than Ripple.
Finally, rising interest rates broadly drove investors away from cryptocurrencies in 2022. Some cryptocurrencies have gradually stabilized over the past year, but they probably won't fully recover until interest rates cuts arrive.
Could XRP head higher over the next few years?
XRP isn't the most exciting cryptocurrency on the market, but a few near-term catalysts could easily propel its price back above $1. It might only be a matter of time before Ripple wins its case against the SEC, and widely expected interest rate cuts in 2024 will likely draw investors back to riskier investments like cryptocurrencies again. A weaker greenback should also drive up the prices of cryptocurrencies alongside precious metals and other hard assets.
As a result, I don't think it's too late for investors who missed out on XRP's huge rally over the past decade to hop aboard the bullish bandwagon. All of its core strengths suggest it could head a lot higher once it resolves its near-term challenges.
