On the cusp of a new era in digital finance, Ripple's XRP (XRP -3.43%) token presents a unique opportunity for the savvy investor. Stuck in a legal challenge from the U.S. Securities and Exchange Commission (SEC) since December 2020, this token disconnected from broader price trends in the crypto market for a while, but is back to mirroring the price changes of Bitcoin (BTC -2.52%) rather closely in the long term.
With the next Bitcoin rewards halving just a couple of months away, and XRP trading at $0.50 per token today, is it fair to expect the money-transfer network's operating token to double in this cyclical upswing?
The Bitcoin halving in April
First, let me point out that a $1 price doesn't look unreasonable. XRP visited those heights in early 2018 and twice more in the early days of the SEC's lawsuit. Those peaks match sudden Bitcoin surges, but with loftier gains and quicker returns to normal levels.
I know, you came here to look at XRP prices and I'm talking about Bitcoin. I do apologize, but Bitcoin's long-term chart effectively sets the clocks across the crypto sector. Sometimes it's hard to tell XRP's chart apart from Bitcoin's. For instance, here's how the two lines have intertwined since the SEC filed its lawsuit against Ripple:
Again, Bitcoin halvings tend to drive the general price action across the whole cryptocurrency landscape. In a roughly four-year cycle, the reward for mining new Bitcoins is halved. This process limits the inflationary creation of too many tokens and supports higher prices. After all, cryptocurrency miners must still pay their electricity bills and hardware installations despite the lower rewards. The whole system stops making economic sense if Bitcoin's price stays firm. And where Bitcoin goes, other cryptocurrencies tend to follow -- including XRP.
The first such event in XRP's lifetime took place on July 16, 2016. About 18 months later, Bitcoin had gained 2,830% while XRP posted a staggering 30,405% jump.
Next, Bitcoin halved its rewards again on May 11, 2020. Bitcoin's peak gain in this 18-month upswing stopped at 548% while XRP briefly reached 831%.
As you can see, the skyrocketing price gains grow a little calmer in each new cycle and you shouldn't expect an 800% jump in the 2024-2025 swing. But it's still serious rocket fuel, and I expect both Bitcoin and XRP to make a significant upward move in the next year and a half.
This may look like a pointless exercise in technical analysis at a glance, but it's more than merely expecting price charts to repeat the patterns of the past. Those reward halvings make a significant difference to the economics of cryptocurrencies, and each one is planned roughly four years in advance. The next one should fall on April 19, 2024, unleashing the effects noted above.
Real-world business value
But Bitcoin halvings don't tell the whole story. Ripple runs a legitimate money-transfer business with a rhythm all its own. As the American lawsuit process winds down, many crypto exchanges in this country are buying and selling XRP tokens once again, having paused that action for more than three years in order to avoid illegal trading complaints.
That opens up the most significant part of Ripple's intended operations -- money transfers across international borders. Thanks to banking partnerships in more than 70 countries, people and corporations can send money from one country to another over the Ripple network, transparently converted from one local currency to another with minimal fees and nearly instant execution.
Try the same transaction in an old-school banking system and you'll incur significant fees for the privilege of completing the transfer in a couple of days. Blockchain-based money transfers are a game-changer, and Ripple's services are among the most advanced on the market so far.
I'm talking about a $1 trillion global market, according to the United Nations Capital Development Fund. That's just remittances, where people move to a higher-income country and send some of their wages home to the family. International business payments represent an even larger target market. Disrupting the old system shouldn't be difficult, given the stifling limitations of bank-based transfers. With or without rising Bitcoin prices, XRP should see significant price growth as the RippleNet service expands and finds more partner banks.
Will XRP reach $1 any time soon?
So XRP should gain plenty of value over time from Ripple's money-transfer operations, and the token also benefits from the market-moving impact of predictable Bitcoin gains.
I can't promise that XRP will reach $1 per token in 2024, but the general trend line certainly points upward. As always, successful investing requires saintly patience and the ability to overcome unexpected challenges and setbacks along the way. But if you pick up some XRP tokens for $0.50 each today, you should see them gain value over time. That $1 signpost shouldn't be too far down the road.
