Aside from Bitcoin, few cryptocurrencies have benefited more than XRP (XRP 0.44%) from President Donald Trump's election win back in November. Now the fourth-largest cryptocurrency in the world by market value, XRP has blasted more than 330% higher (as of June 5). Trump's win ushered in a new regulatory regime for cryptocurrencies, one less focused on caution and more focused on growth. The win also removed several regulatory headwinds for XRP. After experiencing such a strong run built on several strong catalysts, should you still invest $1,000 in XRP today?
Moving past regulatory issues and looking ahead
The big catalyst for XRP was getting the U.S. Securities and Exchange Commission (SEC) off its back. In 2020, the SEC sued Ripple, the company behind XRP, as well as Ripple co-founder Chris Larsen and Ripple's current Chief Executive Officer Brad Garlinghouse, for selling XRP as an unregistered security back in 2013. Investors viewed the case as a big deal because it could have set a precedent for the SEC's regulatory jurisdiction over many cryptocurrencies.
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While Ripple appeared to get a partial victory in 2023 when a federal judge ruled that sales of XRP to retail investors did not constitute sales of unregistered securities, the SEC appealed the case. Only after Trump won the presidential election, eventually leading to the resignation of SEC Chair Gary Gensler, did the lawsuit eventually end, removing a big overhang for Ripple and XRP.
With the lawsuit now in the rear view, Ripple has been able to focus on its cross-border payments business, which leverages XRP, to help businesses move money globally more efficiently. Furthermore, Ripple launched its own stablecoin, called RLUSD.
XRP can also benefit from RLUSD because it serves as a bridge currency, helping people who want to transfer other currencies to RLUSD and vice versa. Ripple also paid $1.25 billion to acquire prime broker Hidden Road in one of the largest acquisitions made in the crypto industry. Management believes the move could accelerate institutional adoption.
Ripple also said that Hidden Road will eventually move post-trade activity to the XRP ledger to streamline operations and reduce costs, aiming to make XRP's ledger the main blockchain network for institutional decentralized finance. Ripple could also potentially serve customers of Hidden Road seeking digital asset custody, similar to what a bank offers.
Other potential catalysts include the future launch of spot price XRP exchange-traded funds (ETFs), which actually buy and store cryptocurrencies and then sell shares based on how much they own, with the goal of tracking a cryptocurrency's price. Ripple could also go public at some point. While Garlinghouse has said the company is not interested in doing this right now, it could still happen at some point.
Should you invest $1,000 in XRP?
Cryptocurrencies are hard to value because they don't generate cash flow and earnings and trade heavily on momentum and on broader sentiment about the sector. The good news is that XRP has a compelling use case in its ability to process 1,500 transactions per second, making it an ideal blockchain and token for cross-border payments.
The bad news is that there are competitors that can also process lots of transactions per second. But XRP is part of a growing ecosystem within Ripple, which now has its own stablecoin and a huge prime broker, on top of the existing bank clients. This could give XRP a leg up in becoming the preferred token for institutions conducting cross-border payments.
For this reason, I think XRP is worth a small, speculative investment, but I wouldn't invest too heavily in the token just yet because it's still too volatile. Consider how much $1,000 means to you financially when investing in XRP. If it's a big part of your portfolio, it's prudent to invest less. If you can invest $1,000 and not worry too much about losing it, then definitely invest because, long term, XRP could have a ton of upside.
