One of the core promises that XRP (XRP 2.79%) extends to its target users -- financial institutions -- is that they'll be able to transfer their money more quickly and more cheaply if they use the token instead of using an alternative technology. The token's feature set is expanding to include the ability to make the same snappy transfers of other assets, too.
There's one new feature in particular that's apt to make the XRP's price rise, potentially for a long time. Here's what the new upgrade means and why it's such a driver of XRP's value.
CRYPTO: XRP
Key Data Points
The market for trading these assets is gargantuan
Investors love holding U.S. Treasury bills and bonds because they deliver a reliable yield, and they're among the most-traded investments that exist. There's always plenty of liquidity to buy from or to sell into, and that contributes to making them a favorite of big banks and institutional investors, as well as other financial institutions more generally. They're pretty much guaranteed to be able to trade in the size that they need to use the investment for their purposes.
How large are we talking, exactly? According to the Securities Industry and Financial Markets Association, the average daily trading volume of U.S. Treasuries in January was approximately $974 billion, up 7.8% year over year. That's a colossal amount of daily turnover.
For comparison, as of noon on Feb. 27, the 24-hour volume of trading of XRP was just over $6 billion. If even a small fraction of daily Treasuries trading were to occur on XRP's chain, it would generate an astronomical amount of additional volume compared to how much the chain sees today, and it'd produce a mind-boggling haul of fees. Now, thanks to XRP's collaboration with Ondo Finance, that's looking like an increasingly likely possibility.
With approximately $600 million in tokenized short-term Treasuries now locked in the XRP chain's value via Ondo's platform, it's possible for financial institutions to hold and trade the assets in a way that generates more fees for XRP. As those same companies may already be holding XRP to dodge money transfer and currency exchange fees, holding Treasuries on the chain would be a logical next step to deepen their integration and reduce their trading friction even further.
In other words, there's now a massive new incentive for banks to onboard themselves and start buying XRP. They can now save costs when working with an asset that they're guaranteed to want to buy and sell in vast quantities. That's a major bullish factor for XRP moving forward, especially if demand for Treasuries increases on its chain in a way that follows the trajectory of increasing demand for Treasuries in the wider market.
The chain's vision for itself is growing, and it's bullish
Putting U.S. Treasuries on the blockchain is a slight departure from XRP's former laser focus on offering cheap and fast transfers to replace older technologies that are slower and more expensive. But it's logical, and it meshes with other expansions to its original vision, like the tokenization of real-world assets (RWAs).
It's difficult to say exactly how many of the world's commodities, properties, futures contracts, vehicles, and other items could one day be tracked via XRP's chain specifically. That doesn't matter much for investors thinking about buying the coin today, though. Pretty much any additional assets that get tokenized and traded on XRP will result in more trading volume and more fees. As long as Ripple, the business that issues XRP, opts to reinvest the fees into upgrades to the network and new collaborations to expand the chain's capabilities, higher prices are very likely.
With that being said, it's hard to imagine a larger influx than that which could be provided by some of the Treasuries market volume. For now, the scale of the program offered by Ondo is smaller than what the largest institutional players need, though it's certainly large enough for them to start dabbling.
Keep an eye on any announcements that describe expansion of the program -- the more demand there is for Treasuries, the more volume there will be that will trickle back to the token's value over time.
