XRP (XRP 1.24%) is already having a decent year, with its price rising by 9% since Jan. 1. There are ample reasons to consider investing in it, provided you can tolerate the risks and volatility of cryptocurrencies.
But there are a few reasons why buying even more of it in the near term is worth considering. There's also one very important risk in play right now that makes a decent case for holding off on a purchase. So, let's synthesize what's happening here and gather as much information as you will need to feel confident in whatever you decide.
CRYPTO: XRP
Key Data Points
1. A big regulatory risk is now defused
On March 19, the Securities and Exchange Commission (SEC) dropped a lawsuit it had been pursuing against Ripple, the company that issues XRP, for more than four years. Regulators had alleged that the business made an unregistered securities offering when it issued XRP. With the resolution of the case, there is now a dramatically lower risk that the coin will be yanked from being traded on exchanges due to regulatory non-compliance.
Most of the immediate price boost from the news was already priced into the coin, so don't buy it expecting it to go straight up as a result of this development. But if you were hesitant to invest before due to a lack of regulatory clarity, there are fewer possible stumbling blocks than before.
2. A key set of catalysts is coming closer
In keeping with the more favorable regulatory environment confirmed by the lawsuit getting dropped, there's a set of potential regulatory catalysts coming up that could drive the coin's price higher if they occur. Specifically, the SEC is considering whether to approve a total of nine exchange-traded funds (ETFs) holding XRP.
If one of those is approved later this year, there is a high probability that the others will be approved, too. Approvals would be bullish for the coin because they would open the door for the asset managers planning to issue the ETFs to start buying significant amounts of XRP. After all, they need to hold the coin in sufficient quantities before offering a fund that claims to hold it.
Their purchasing activity could send prices higher. More importantly, over the long term, ETFs would increase the degree of integration between XRP's chain and the traditional financial sector, enabling deeper liquidity.
For banks and other financial institutions that might be interested in using XRP to make international money transfers or for other purposes, that deeper liquidity would allow them to transact at the (large) scales they typically prefer. So, assuming they're approved, the ETFs could catalyze even more demand in the form of additional adoption of the coin.
3. Tech upgrades will continue to attract the right users
The financial institutions that use XRP also already use a galaxy of other financial technologies to address their needs and increase efficiency. The more XRP's chain gets upgraded and the more it caters to the things those potential users need, the more likely they will be to start using XRP instead of the alternatives.
On that note, as of late February, the chain has automated market maker (AMM) functionality and new on-chain data sources, among other improvements intended to make it easier for banks to verify the identity of counterparties in a transaction. It's also planning to improve its tools for confirming compliance with regulations, another key feature set that will make it a better place for its target users to do business.
Over the long term, more and more bank-friendly functionalities will be added to the chain. When paired with its budding platform for trading real-world assets like commodities and real estate, the case for its target customers to use XRP will get stronger and stronger. And that's a solid reason to buy it, as it implies higher demand for the coin.
1 reason to wait: Trade war concerns
XRP is worth buying today, but that doesn't mean it will be a volatility-free hold for those who do. In particular, concerns about a possible trade war, or the impacts of an actual trade war, could send the coin's price tumbling.
It's unclear exactly how this risk might play out, as the status of the U.S. government's trade policies appears to fluctuate from day to day. Still, if you're easily spooked by volatility, there's no shame in waiting for some short-term chop to dissipate or settle before testing the waters.
