The price of XRP (XRP 0.72%) is surging once again. This week, the coin popped nearly 30% in value. Over the past month, the crypto asset has increased in value by roughly 60%. And over the last 12 months, XRP has surged by around 500%.
After blasting through the $3 mark and setting a new all-time high, is Ripple still a buy? If you believe in this story, the token could be a buy at any price under $10. But there are a few things you want to be aware of before loading up.
CRYPTO: XRP
Key Data Points
Is Ripple gaining regulatory and industry buy-in?
The biggest cause of Ripple's recent price surge has been growing optimism surrounding the regulatory environment, as well as encouraging signs of potential industry adoption.
For years, Ripple has faced a long list of regulatory and adoption challenges. From a regulatory standpoint, the project has been involved in a lawsuit by the Securities and Exchange Commission (SEC), which charges it with selling unregistered securities in the coin lauch. After roughly five years, the case was finally settled for $50 million in May, unburdening the project from one of its biggest valuation drags.
From an industry buy-in standpoint, the project has long struggled to attract top-tier banks to its novel system of cross-border transactions. That remains a long-term challenge, but ongoing adoption by global banks, including Travelex Bank in Brazil, Axis Bank in India, UnionBank in the Philippines, ChinaBank, and Qatar National Bank, has provided real-world validation of Ripple's network. Partnerships with local banks help the Ripple team make their services easy to use.
The cross-border transactions market is already worth around $200 trillion today. By the end of the decade, its value is expected to approach $300 trillion. Ripple is clearly competing in a gigantic market -- one of the largest total addressable markets in the world. Adoption and regulatory approval have long been the challenge. But improving conditions this year for both of those categories have investors increasingly excited.
Image source: Getty Images.
Buy Ripple today if you fit this one characteristic
Do improving conditions make Ripple a buy today? For many investors, the answer is yes. In fact, Ripple could be a buy as long as it's under $10. At $10, Ripple would have a $600 billion market cap. That's justifiable, assuming Ripple takes only a few percentage points off the market shares of various global payment networks.
The SWIFT network, for example, handles more than $5 trillion in transactions per day. Capturing just 1% of this volume would result in roughly $18 trillion in annual volume for Ripple. At that rate, Ripple would likely be worth significantly more than $10.
If you're an aggressive growth investor seeking maximum upside potential, Ripple looks like a buy at under $10. But if you're looking for a more balanced risk-versus-reward scenario, it's best to look elsewhere. That's because the global payments system is highly consolidated, as SWIFT's massive volumes show.
Financial institutions have long been wary of competing systems and are unlikely to switch en masse to a relatively unproven system like Ripple, even if Ripple's network is superior on paper. Additionally, there is growing competition for alternative payment networks such as Visa's B2B Connect and JPMorgan's Onyx platform.
From a fundamentals perspective, it's still far too early to nail down a fair valuation for Ripple. It remains a very speculative asset. There's huge upside to be sure, but if and when that upside is realized, as well as its ultimate magnitude, is difficult to predict.
Aggressive growth investors should strongly consider a small exposure to Ripple. Most investors, however, are better off elsewhere.
