The huge summer rally for XRP (XRP +0.46%) could be coming to an end soon. On June 21, XRP was trading for just $2. Just 30 days later, it hit a 52-week high of $3.65. Since then, however, it has pulled back to the $3 level.
Typically, this would be a buy-the-dip opportunity for XRP investors. But a number of warning signals are now flashing red, and investors are understandably concerned.
What's priced into XRP right now?
In many ways, crypto prices are similar to stock prices. They should reflect investor expectations, based on all publicly available data. Right now, it looks like the market has already priced in many of the growth catalysts that were supposed to send XRP higher this year.
For example, consider the recent settlement of the Securities and Exchange Commission (SEC) case involving Ripple, the company behind the XRP token. The final settlement of the case took place on Aug. 7. Since then, the price of XRP has slipped. On Aug. 7, the price of XRP was $3.30. Today, it is $3.08 (as of Aug. 14).
CRYPTO: XRP
Key Data Points
So it is safe to say that the SEC legal settlement has already been priced in. The market has known about it for a long time -- ever since the U.S. presidential election, in fact. That's because the election of the pro-crypto Trump administration was widely viewed as a clear signal that many of the legal and regulatory issues that dogged the crypto industry (and Ripple specifically) would soon be resolved.
The arrival of new XRP spot exchange-traded funds (ETFs) is also likely priced in. Right now, Bloomberg gives these spot XRP ETFs a 95% chance of approval. Ever since January, there has been constant debate about their potential effect on the price of XRP. So, again, it's safe to say that approval of these ETFs has already been priced in. When they're finally approved, most likely sometime between now and October, don't expect a big bump in XRP's price.
What's not priced into XRP right now?
Things get interesting when you start to consider what has not been priced into XRP. The market, for example, seems to be finally coming to grips with just how comcentrated ownership of XRP really is. According to some estimates, just 20 XRP blockchain wallets hold 50% of all XRP in circulation.
Thus, when one of these big wallets decides to sell XRP on the market, it can have a very big effect on XRP's price. This is exactly what happened in mid-July, when a top Ripple insider dumped 50 million XRP worth a combined $175 million. So the new concern is that this pattern of profit-taking might hold back any future gains for XRP. Any time XRP nears a new all-time high, insiders might sell to lock in their gains.
Image source: Getty Images.
It's also very difficult to price in what's actually happening on the XRP blockchain these days. Yes, there are constant stories about new stablecoin initiatives, new asset tokenization initiatives, and new cross-border payment initiatives. But if you look at the numbers, things just don't add up.
It's starting to look like traders drove up the price of XRP based on what it could do in the future, not on what's actually happening right now. Stablecoins are a good example. Instead of helping to create new market opportunities for XRP, they might end up cannibalizing some of its market opportunities.
What happens next for XRP?
That's why, in many ways, it feels like XRP is at an inflection point right now. With a market cap of more than $180 billion, XRP has almost the same market cap as Uber (UBER +0.28%). So, as an investor, that might be an interesting question to ask yourself: Do you think that XRP is more valuable than Uber?
If the answer is "yes," then it might be time to buy the dip on XRP. You're getting XRP at a relative bargain. But if the answer is "no," it might be time to look for other crypto investment opportunities elsewhere.
