Excluding stablecoins, XRP (XRP +1.30%) is the third-largest cryptocurrency in the world, behind Bitcoin and Ethereum, with a market cap closing in on $152 billion. The token got a significant lift after President Donald Trump's election last November, as it was expected that he would install crypto-friendly leadership at the Securities and Exchange Commission (SEC).
The SEC later dropped many of its high-profile cases against crypto companies, including a long-standing case against Ripple, the company behind XRP. Since then, XRP has been one of the strongest-performing cryptocurrencies.
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The token runs on a strong technical network that is capable of processing 1,500 transactions per second, giving the network and token the potential to play a big part in the business of moving money across international borders. The Ripple ecosystem, which has many clients in the traditional finance sector, leverages XRP to help clients move their money in a more rapid and capital-efficient manner.
While XRP already has significant momentum, one important tailwind could send the token skyrocketing.
Stealing volume from SWIFT
Ripple CEO Brad Garlinghouse has previously said that he thinks Ripple's ecosystem, leveraging XRP and its stablecoin RLUSD, has the potential to attract international payments volume away from SWIFT (Society for Worldwide Interbank Financial Telecommunications), the cooperatively run messaging system that banks worldwide use to conduct international transactions.
Ripple's solution allows traditional banks to conduct nearly instant payments around the clock. Clients can send payments to people or businesses in over 90 markets worldwide that they can access through stablecoins or local currencies. Ripple's solution also offers on-demand liquidity, meaning banks don't need to pre-fund accounts, which frees up their own capital and liquidity.
CRYPTO: XRP
Key Data Points
If the Ripple ecosystem -- and therefore XRP -- can indeed steal meaningful market share from the legacy SWIFT network and get more clients to use it for international payments, it would be proof of XRP's use case playing out. That growing real-world utility for XRP in turn would likely drive up demand for it, which could provide a big tailwind to its price.
While Ripple has obtained some high-profile customers, such as BBVA, Spain's second-largest bank, it is still unclear how much Ripple and XRP are being used for international payments, and whether they can truly make a dent in SWIFT's market share. There's also a question of how Ripple will fare against competition from other emerging players in the space. Some other blockchain networks can already process more transactions per second than Ripple.
For all of these reasons, while I see significant potential in XRP, I'm not ready to go all in yet, which is why my position in this speculative asset remains small.
