Over the last century, no asset class has come close to matching the annualized return of stocks. But when the lens is narrowed to the past decade, Wall Street's major stock indexes haven't been able to hold a candle to cryptocurrency returns.
In February 2016, the cumulative value of all digital currencies totaled less than $8 billion. As of this writing in the late evening on Feb. 7, the aggregate value of digital currencies is approximately $2.38 trillion, based on data from CoinMarketCap.com. Widely held digital tokens Bitcoin (BTC +2.57%) and XRP (XRP +2.97%) have catapulted higher by 18,500% and 17,450%, respectively, over the trailing decade.
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Despite these life-altering gains, optimism for this highly popular cryptocurrency duo hasn't slowed on Wall Street. Select pundits (Wall Street analysts or industry experts) are looking for up to three-to-four-digit upside for Bitcoin and XRP in the coming years. However, when an investment seems too good to be true, it often is.
XRP: Implied upside of 768% by the end of 2028
Among Wall Street analysts, Standard Chartered's Geoffrey Kendrick sports the highest price target for XRP, the bridge currency used for cross-border payments in Ripple's payment network. His firm's report, published early last year, called for XRP to reach $8 in 2026, $10.40 per token in 2027, and $12.50 by the end of 2028. If accurate, Kendrick's call would represent 768% upside from the current price per XRP token.
One of the leading catalysts for XRP, according to Kendrick, was the expected approval of spot XRP exchange-traded funds (ETFs), which has occurred since Standard Chartered's report was published. Giving investors access to spot XRP ETFs should lead to cash inflows and make it significantly easier for optimists to wager on the token's success.
Kendrick also pointed to the end of a multi-year legal battle between the U.S. Securities and Exchange Commission (SEC) and Ripple as an upside catalyst. With the SEC and Ripple dropping their respective appeals, the gray cloud of litigation has been lifted.
Lastly, Kendrick anticipates the XRP Ledger, which is used for cross-border payments, may become a core player in future tokenization efforts.
CRYPTO: XRP
Key Data Points
While there's no question that XRP enjoyed a perfect storm of upside catalysts in the wake of President Donald Trump's election, the luster has worn off. XRP is more than 60% below its all-time high of $3.65, and there are reasons to believe it won't get anywhere close to Kendrick's high-water price target by 2028.
One of the biggest issues for XRP is its lack of stand-alone value. Although it's playing a key role as a bridge currency for RippleNet, not every financial institution is required to use XRP as the bridge currency on Ripple's payment network. Investors in XRP have no claim to RippleNet, which is where cross-border payment profits would be generated.
Another problem for XRP is that its adoption rate isn't as robust as advertised. Though more than an estimated 300 global financial institutions are partnered with RippleNet, over 11,000 financial institutions rely on the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to facilitate cross-border payments. Pulling banks away from SWIFT is easier said than done.
It's also unclear whether XRP is the logical choice for cross-border payments. While its more than 300 partnerships do help its case, other blockchain-based networks can settle faster or are less costly per transaction.
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Bitcoin: Implied upside of 1,629% by 2030
However, a 768% projected gain for XRP is a drop in the bucket compared to the 1,629% return Ark Invest's Cathie Wood is looking for (in her firm's bull-case scenario) by 2030 in Bitcoin. Wood's $1.2 million price target for the world's largest cryptocurrency was actually reduced by $300,000 from $1.5 million in November due to the rise of stablecoins for payments.
Wood's optimism for Bitcoin can be traced to two factors. First, she and her firm view the world's leading digital currency as a safe-haven asset that will siphon away precious metal investors. Bitcoin is commonly referred to as "digital gold," due to its limited lifetime supply of 21 million tokens. The world's most valuable cryptocurrency is viewed as an ideal hedge to an ever-expanding U.S. money supply.
Secondly, Ark Invest's Cathie Wood believes Bitcoin can benefit from emerging market adoption and institutional investor acceptance. The presence of spot Bitcoin ETFs makes it easier than ever for investors to gain exposure without having to purchase Bitcoin directly on a potentially obscure cryptocurrency exchange.
Although Bitcoin has no shortage of support from the investing community, there are viable reasons to believe this optimism is overdone or outright misplaced.
CRYPTO: BTC
Key Data Points
For one, its scarcity is a function of a few lines of computer code. While it's unlikely that developer consensus will lead to an increase in Bitcoin's circulating supply, the possibility of this happening is greater than zero. Comparatively, we can't create any more physical gold than what can be mined on Earth. Physical gold is a finite asset, whereas Bitcoin creates the illusion of scarcity.
The world's leading digital currency also failed the real-world utility test. Though El Salvador's government has embraced Bitcoin as an asset reserve, a multi-year effort to get its citizens to use Bitcoin as a medium of exchange was unsuccessful. Bitcoin is far too volatile to be used for everyday purchases, and it offers neither the fastest settlement nor the cheapest transactions. In many ways, Bitcoin is a first-generation network that's been surpassed by third-generation blockchains.
With Bitcoin's first-mover advantage fading over time, it seems unlikely that it'll come anywhere close to Wood's aggressive $1.2 million price target in 2030.
