Since Donald Trump won the presidential election in November, Bitcoin (BTC -2.13%), typically viewed as a bellwether for the crypto sector, has performed extremely well and has proved to be remarkably resilient, surpassing $100,000 on several occasions.
However, it has clearly benefited from the belief that it is a form of digital gold. Investors have grown increasingly concerned about the U.S. government's fiscal situation and have piled into assets like gold and Bitcoin, seemingly as a flight to safety.
But not all cryptocurrencies have benefited, and some have been much more volatile and vulnerable to bad news. XRP (XRP -2.81%) has rocketed higher since Trump's victory, but has fallen from highs reached earlier this year. Could investing $25,000 in XRP make you a millionaire?
The last seven months have been great for XRP
Before Trump was re-elected, XRP, one of the largest cryptocurrencies in the world with a market cap of more than $140 billion, had struggled. In 2020, the Securities and Exchange Commission (SEC), formerly run by Gary Gensler, sued Ripple, the company behind XRP, for allegedly selling the crypto as an unregistered security in 2013. Ripple co-founder Chris Larsen and the company's current chief executive officer, Brad Garlinghouse, were named as defendants in the case.
Image source: Getty Images.
The lawsuit garnered attention from the entire industry because it could have set a precedent over how much jurisdiction the SEC had over many cryptocurrencies, thus setting an unfriendly spotlight on XRP. The case carried on for several years.
Once Trump won, however, he promised to deregulate the industry, and Gensler resigned from his post at the SEC once Trump took office. Eventually, the agency dropped the lawsuit, which has seemingly opened the possibility of an XRP exchange-traded fund (ETF). Trump also elevated many pro-crypto officials as advisors or to his cabinet.
Now the questions are: What's next for XRP? And what catalysts can keep pushing the cryptocurrency higher? ETFs seem like they will happen at some point. Ripple continues to expand its payments network, add new clients, and make acquisitions.
As Ripple ramps up its institutional business, helping clients set up more-efficient ways to conduct cross-border payments and establish digital asset capabilities, adoption of XRP should grow because XRP plays a key role in these transactions.
And Ripple launched its own stablecoin, called RLUSD. Stablecoins are digital assets pegged to a currency or commodity. In this case, RLUSD is pegged to the U.S. dollar.
XRP benefits because it serves as a bridge currency for people wishing to convert other currencies over to RLUSD or vice versa. Garlinghouse has also said that Ripple could go public if it wanted to, although management is not focused on this right now. It would certainly be interesting to see how an initial public offering or direct listing of a company so closely linked to one of the world's largest cryptocurrencies might affect the liquidity and usage of that cryptocurrency.
Could investing $25,000 in XRP make you a millionaire?
With XRP trading at about $2.40, the cryptocurrency would need to rise 40-fold to turn $25,000 into $1 million. Since launching in 2012, XRP is up more than 15,000%, so I've learned to never say never in crypto land.
The issue with cryptocurrencies is that they don't generate earnings or cash flow, so the assets become very speculative. XRP's main use involves cross-border payments, due to its ability to process many transactions per second. Higher adoption by institutions in the future could drive the token higher, but there is also competition from other cryptocurrencies like Solana.
I think making long-term price predictions is foolish when it comes to crypto due to some of the issues highlighted above. Investing $25,000 in XRP feels too risky, in my opinion, unless that is a small amount of money for you. I think XRP has immense potential, so it's worth investing in, but I would keep positions smaller and more speculative for now.
