XRP (XRP +1.03%) investors received some great news recently -- the Securities and Exchange Commission dropped its case against Ripple, the company behind the token. The case hung over the cryptocurrency for years, as regulators alleged Ripple should have registered XRP as a security. Amid a more favorable political climate for crypto under President Donald Trump, it's a big win for XRP.
And now with that cloud no longer hanging over it, is the path clear for a rally? Can investing in XRP potentially turn $10,000 into $1 million or more in the long run?
CRYPTO: XRP
Key Data Points
Why XRP has a lot of upside
Although investing in crypto is largely speculative, there are ample reasons to expect XRP to rise in value over the long haul and be one of the better digital currencies to own. The big use case for XRP is its potential to reduce friction in the financial markets by offering an efficient and cost-effective way to send money all over the world.
Transactions that are settled on the XRP Ledger can take as little as three to five seconds, which can make XRP one of the fastest cryptocurrencies out there. And the cost can be as little as a fraction of a cent, according to Ripple. What increases the odds of success for XRP is that its goal isn't to replace financial institutions and traditional banking, but to complement them.
Ripple has already established partnerships with top financial companies, including Santander, Mastercard, and American Express, adding credibility to the idea that it can work with these types of businesses over the long term, to the benefit of all parties.
Can it be a 100x investment?
For a $10,000 investment in XRP today to make you a millionaire, you would need it to rise 100 times in value. Currently, the coin's market cap is about $120 billion. If it rose 100-fold in value, that would put its valuation at more than $12 trillion -- much more than Bitcoin's current value of about $1.7 trillion.
Although there is a lot of hope that XRP can be a game-changer for financial markets that will solve problems and reduce costs internationally, it may be a bit too much to expect it to grow to such a high valuation, even over a period of 10 or 20 years. It's already one of the most valuable coins on the market, and while there are use cases that can help drive up its value, rising that much is unlikely, especially given the possibility for other coins to come in and provide similar functionality.
XRP may have use cases, but speculation is still a key driver of its valuation
XRP is one of the most popular coins for crypto investors today. And while it may be more useful than the thousands of other coins out there, it's still a speculative buy, and investors need to treat it as such. Without a competitive advantage -- a way to prevent a new, more sophisticated coin from coming in and offering financial institutions an even better option for cross-border payments -- it's hard to see how XRP will be one of the top cryptocurrencies in the future. It is among the most valuable ones right now, but it's by no means a sure thing that it will stay that way.
Although XRP has the potential to outperform other cryptocurrencies, it's still a risky investment, one that is going to be primarily suitable for investors who have a high risk tolerance. If you're bullish on its prospects, you may want to consider allocating a small position of your portfolio to the coin, but I'd be wary of taking a large position in it.
