What could a serious cryptocurrency like XRP (XRP 1.00%) have in common with silly meme coins like Dogecoin (DOGE 3.85%) and Shiba Inu (SHIB 1.04%)? As it turns out, there's one type of catalyst that all three coins are exposed to. In fact, given the current conditions in the market and the regulatory outlook, it's likely that all three will experience this catalyst relatively soon, and they might see significant price gains as a result.
CRYPTO: XRP
Key Data Points
Investors are about to have easier access to these tokens
With the Trump administration showing decidedly pro-cryptocurrency sentiments, the industry is headed toward what could be a handful of game-changing regulatory breakthroughs. In particular, the Securities and Exchange Commission (SEC) is signaling that it might be open to the idea of approving certain financial instruments that will deepen the integration between cryptocurrencies and the traditional financial system.
Those instruments, including exchange-traded funds (ETFs), have thus far been tightly restricted. As a result, only the largest cryptocurrencies -- Bitcoin and Ethereum -- have spot ETFs approved for trading on the market.
But in late January and early February, several asset managers filed with the SEC to issue ETFs that hold XRP and Dogecoin, and filings are likely coming soon for Shiba Inu ETFs soon as well. So the odds are high that a swath of new cryptocurrency-based securities will be accessible to everyday investors. This will make it easier for investors who haven't opened cryptocurrency wallets, but who do have traditional retirement or brokerage accounts, to put funds into crypto.
CRYPTO: DOGE
Key Data Points
If those ETFs get approved in the next year or two, that's bound to have a few positive consequences for the prices of these coins. A reduction in barriers to new capital flowing in means that, on average, more capital is likely to shift into the cryptocurrency ecosystem. The issuers of the ETFs will need to purchase more tokens to provide the assets underlying their shares. And the coins involved will trade with more volume.
The increased volume from ETF trading probably will benefit XRP the most because it earns fees from each transaction made on its network. Furthermore, XRP would specifically benefit from deeper integration with the traditional financial system because it depends on banks and securities firms to hold its coin and use it as a medium of exchange for making international money transfers. So if any XRP ETFs are approved, that should add credibility to the investment thesis for holding the coin, and make it an even stronger performer over the long term.
Higher trading volumes may also support higher prices for Dogecoin and Shiba Inu, too. It's not beyond the realm of the possible to expect some investors to buy ETFs holding each to get a bit of exposure to these highly risky and highly speculative assets.
CRYPTO: SHIB
Key Data Points
Nothing about the fundamentals is changing
Despite all this, investors should stay levelheaded about the possible consequences of the potential approval of these new ETFs.
ETF approvals would not be a panacea for any underlying problems with a crypto project, and they would not send any of these coins to the moon. The magnitude of the impact such ETFs could have on XRP's price would specifically depend entirely on how popular the ETFs are -- which is to say, how much additional trading volume they would stimulate.
Moreover, for Dogecoin or Shiba Inu, the approval of ETFs would not in any real sense confirm some tangible investment thesis for the coins.
They are and will remain free-floating meme coins unanchored to any concrete value-generating activities, and they are incapable of changing that with productive and directed efforts in the way that real projects like XRP are. They are tools for speculation and gambling today, and nothing we've discussed here will change that, nor make the odds more favorable for investors who feel lucky.
So if you want to take action based on this new information, consider buying XRP. It's already a strong coin, and if it picks up a tailwind in the form of an ETF approval, that would be a nice bonus.
