Over the past 12 months, Ripple (XRP 0.78%) has seen its valuation soar by more than 300%. With Ripple's market cap now at roughly $200 billion, many crypto investors believe the project to be overvalued. But according to one statistic, Ripple remains extremely undervalued compared to its long-term potential.
Ripple's total addressable market is worth trillions of dollars
In a recent report, Bitwise Investments outlined the ultimate potential for Ripple, which seeks to supplant the current global system for cross-border transactions with its own protocol, which it argues is faster, cheaper, and more transparent. How big exactly is the cross-border transactions market? Significantly bigger than Ripple's current valuation.
"The Total Addressable Market (TAM) of global cross-border payments is substantial," Bitwise's report stresses, noting that this market surpassed $150 trillion in 2022. By 2027, it believes, total cross-border payments could exceed $250 trillion in annual value. "Capturing a small percentage of the global cross-border payments market could have a very significant impact on overall network activity and the economics for XRP," Bitwise concludes.
Even if it captured just 1% of its TAM in 2027, that would give Ripple more than $2.5 trillion in annual network volume. But there are a few critical risks to be aware of before jumping in.
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Gaining even a 1% share in this huge market will be difficult for Ripple. The company still hasn't signed any major money center banks to use its payment network. And ongoing Securities and Exchange Commission investigations continue to complicate the story. Put simply, it will be difficult to get a centuries-old industry to switch over to a relatively new method of exchanging trillions of dollars, especially when that new system has faced regulatory pressures in the past.
Is the upside potential for Ripple very high in the long term? Absolutely. But the road to get there will be difficult. Patience will be needed, as well as a heavy dose of risk tolerance.
