The cryptocurrency market is famous for its boom-and-bust volatility -- those who invest in it can make (and lose) a lot of money relatively quickly. That said, the asset class really shines for those who are willing to hold positions for the longer term. For example, if you'd put $10,000 into XRP (XRP +0.47%) three years ago, you would have a position worth roughly $51,300 today. That return of 413% trounced the S&P 500 index's gain of 86% over the same time frame.
Now that it sports a market cap of about $143 billion, it's fair to say that XRP's days of easy, meme-coin-like growth are probably behind it. But the asset still looks capable of outperforming the stock market as macroeconomic factors and potential regulatory wins continue to attract investors. Here's what the next three years might have in store for XRP.
CRYPTO: XRP
Key Data Points
Macroeconomic conditions are favorable
The U.S. dollar is the world's reserve currency. That means that for many American investors, diversification into different currencies hasn't really been top of mind. However, there are some early signs that this paradigm could be weakening. The U.S. dollar index -- which measures the dollar's general value relative to the rest of the world's currencies -- has fallen by an alarming 8.7% since the start of the year, partially due to factors like erratic U.S. trade policy and uncertainty over issues like the independence of the Federal Reserve and Washington's commitment to not defaulting on our ever-rising national debt, which now stands at $37.6 trillion.
Foreign currencies aren't necessarily a good alternative to the dollar, though, because other countries may have their own challenges with debt and policy, and their financial markets are usually less dynamic than those in the U.S.
Cryptocurrencies look like a better bet because they offer the best of both worlds -- allowing investors to diversify outside the mainstream U.S. financial system while still enjoying the potential for market-beating returns. But not all cryptocurrencies are created equal.
Why XRP Stands out
When it comes to any currency, trust and reputation are extremely important. And that's where XRP stands out. While it is not as commonly recognized as industry leaders Bitcoin and Ethereum, it arguably deserves to be ranked in third place in the crypto universe because of its size and seniority (XRP was launched in 2012, just three years after Bitcoin). The token's extremely active development team at Ripple Labs has played a large part in its ongoing resiliency.
Image source: Getty Images.
The developers have successfully fought off a Securities and Exchange Commission (SEC) lawsuit that aimed to regulate their retail token sales under securities law. And they have continuously updated XRP's ecosystem with new assets such as the dollar-pegged stablecoin RippleUSD. While RippleUSD is different from XRP, both tokens share the same ledger, which means RippleUSD fees are paid with XRP, leading to more activity on the network and deflation of the total supply. (Transaction fees are removed from circulation through a process called burning.)
Ripple Labs took things a step further in July when it applied for a U.S. national bank charter. This move will give Ripple's tokens even more legitimacy in the financial industry and help the developers bypass third-party banks when operating and developing new fintech products.
A spot XRP ETF could change the game
The next few years promise to see XRP further integrated into the mainstream financial system. The SEC has a late October deadline to make decisions about whether to approve spot exchange-traded funds (ETFs) for a slew of popular altcoins, including XRP, and industry analysts were optimistic about their chances. And while the ongoing government shutdown has thrown the timeline into question, that delay won't last forever.
Spot ETFs could help further integrate XRP into the mainstream by giving the asset another layer of regulatory legitimacy. This would also make XRP easier for people to trade without dealing with blockchain-specific complexities like wallets and key management. Retail investors could instead access it through familiar mediums like their brokerage or retirement accounts.
In light of all this, XRP looks likely to be a winner over the next three years and beyond.
