Cryptocurrencies have been even more volatile lately than usual, and many investors are losing interest in crypto, with most tokens experiencing dramatic declines.
The Ripple token XRP (XRP -1.32%) is no exception, and its price has tumbled 63% over the past 12 months.
What are the chances that XRP could mount a massive comeback and potentially mint some millionaires? Not very likely. Here's why.
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XRP's biggest catalysts have played out
XRP has benefited over the past several years from a handful of catalysts that have helped accelerate its value. One of the most important developments has been the introduction of cryptocurrency exchange-traded funds (ETFs), specifically XRP ETFs.
Exchange-traded funds are an easy way for investors to own stocks and cryptocurrencies, and the launch of the first XRP ETFs less than two years ago made it simple for crypto-curious investors to own some of the token without having to jump through the more technical hoops of owning crypto outright.
The anticipation of an XRP ETF helped drive its price higher for a while, but now that the ETFs are available, the price buildup that occurred before launch has played out.
What's more, the more than $1.4 billion of inflows into XRP ETFs have been far below initial estimates. JPMorgan originally estimated between $4 billion and $8 billion in XRP ETF inflows in the first year.
Additionally, some of XRP's gains over the past couple of years were likely tied to the U.S. government's more open stance toward cryptocurrencies. After the White House said it was launching a Strategic Bitcoin Reserve, some tokens, including XRP, gained traction, on the hope that they'd eventually be added to the reserve.
But XRP never made it into the reserve, nor have any other cryptocurrencies, and any initial hope that XRP would gain more acceptance in the U.S. government has faded.
CRYPTO: XRP
Key Data Points
Some investors have moved on to AI
While there isn't just one reason why investors are shunning cryptocurrencies, including XRP, right now, I think part of the reason is that they've found artificial intelligence stocks much more appealing.
The AI market has created some massive stock winners over the past three years, with Micron Technology surging 1,100% and Nvidia rising 368%. Meanwhile, XRP is up just 55% over the same time.
The strong gains from these tech companies, and others, come from selling actual products and services, which generate revenue and earnings -- something XRP and its peers don't have.
This means tech investors now get the huge gains they used to look for from high-flying cryptocurrencies, from companies that sell real products and actually make money. That's a far less risky bet than owning digital tokens.
With XRP's value already petering out and investors shifting their attention toward AI stocks, there's little chance that buying XRP now will make you a millionaire.
If you own some XRP, there's probably no harm in holding onto it to see if additional inflows of XRP ETF purchases help boost its price, but selling it now -- especially if you've been holding for a while and can make some gains -- may be the best bet.
