The cryptocurrency market is full of examples of coins returning 900% or more. XRP (XRP +0.85%) has done it in the past. Can it do so again?
Many investors hope so. And XRP definitely seems like a good choice at first blush: It has a loyal following and a compelling real-world use case — something a lot of projects can’t claim. And critically, it’s trading at just above $1.10, so imagining it trading at $11 feels totally reasonable on its face.
But can it? I doubt it. And here’s why.
The eye test
First, I’m not sure an $11 XRP passes the eye test.
XRP’s current market cap — the number of tokens in circulation multiplied by the price — sits around $68 billion. Which means that if your $1,000 turned into $10,000 and XRP were trading at $11, that figure would be $680 billion.
That’s a pretty large figure. It’s also nearly 4 times the market cap of Ethereum and just shy of 60% of Bitcoin‘s market cap.
Obviously, the prices of all of these are in flux. It’s not as if Bitcoin’s and Ethereum’s market caps would stay static, but I think it’s still a useful line of thinking. After all, the crypto market is still essentially driven by sentiment and “vibes.”
Ripple adoption won’t drive XRP demand the way you think
The much more fundamental issue is this: The bull case for XRP rests on a faulty understanding of its mechanics. The belief that mass adoption of the technology XRP supports, the technology and products offered by Ripple, the private company behind the token, would put massive pressure on demand, makes a lot of sense. And it’s compelling.
The problem is threefold:
One, the majority of the transaction volume that Ripple handles doesn’t use XRP at all. That’s because its main product, the one used by the big banks you’ve heard of, is basically a messaging service. No XRP required.
Two, the cross-border and liquidity product that uses XRP as a central component drives less demand than you might think. The system requires the flow of XRP, but not the accumulation of it. I think a lot of investors imagine banks sitting on accounts with large XRP balances, and that’s just not the case.
And finally, reason No. 3: RLUSD.
RLUSD is eating XRP’s lunch
Ripple launched its own stablecoin in response to their explosion in popularity among the very clients it’s trying to serve. Stablecoins are attractive to financial institutions looking to transact large volumes for the very fact that they don’t make great investments: Their price doesn’t change — hence the name.
Since its introduction, RLUSD has rapidly replaced XRP as the “bridge asset” of choice for the cross-border payments Ripple handles. XRP has been left playing second fiddle. And it shows. Since RLUSD was released, XRP is down nearly 50%.
The bottom line on XRP’s 900% potential
So, do I think XRP can turn $1,000 into $10,000? No, I do not. I think it has a better chance of turning it into $500.