When it comes to crypto investments, there aren't too many that are more appealing to buy with $3,000 than XRP (CRYPTO: XRP). During the past three years alone, its value climbed more than 1,370%.
During the next 10 years and beyond, it's possible that those returns will look like peanuts. Here's why this asset is uniquely suited to holders who are willing to take a bit of risk and hang onto their investment until the cows come home.
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There's more than one driver of value here
XRP's utility is the main thing that will cause its value to continue increasing over time. That utility is derived from the ability of its network to very inexpensively and nearly instantaneously transfer XRP from one wallet to another.
Because users can't execute international financial transfers at similar speeds or as cheaply with older money-transfer technologies, they're incentivized to buy and hold XRP themselves so that they can use it to make transfers. In fact, older technology like SWIFT transfers can be many times more expensive and take days to execute instead of seconds, and that's before accounting for the costs users need to shoulder to exchange currencies to actually close the transaction. XRP's users, which include banks and other financial institutions, are distributed across the globe and in ever-increasing numbers; each new player that joins the XRP network increases the coin's utility because it means holders can transact with a new counterparty for next to nothing.
With each transaction, a small amount of XRP is burned, infinitesimally reducing the supply outstanding of the coin, boosting its value slightly. But the coin can do more than simply be a medium of exchange for transfers.
It can also be used to track and trade real world assets on the blockchain, including ones that are very much in demand, like U.S. Treasuries. Real estate, commodities, and practically any other real world asset could be onboarded to the chain and traded with the help of XRP's soon-to-launch automatic market maker (AMM) functionality, ensuring that transactors get a good settlement price relative to what they were seeking. These asset-tracking and trading capabilities will make the chain an even more appealing place to do business for banks and their peers.
Especially in the context of sending these types of assets across international borders, it's hard to do better than using XRP. And it's just getting started with supporting these types of transfers. Imagine what the next 10 years could bring as more and more of the world's assets are put on blockchains like XRP's; demand for the coin could be tremendous.
These catalysts could sweeten the pot even more
XRP's long-term value drivers are almost unparalleled in the crypto sector. But it's exposed to a couple of upcoming catalysts that might make its long-run performance even better.
The Securities and Exchange Commission (SEC) is currently considering whether to approve a swath of different exchange-traded funds (ETFs) that could hold XRP. Those ETFs, if approved, would add a lot of volume to the network; such funds are already approved in some countries. More volume is exactly what financial institutions want to see, as it means there's a much higher chance that they'll be able to transact in the necessary quantities without worrying about moving the coin's price. It would also increase the rate of coins being burned, boosting the value of the remaining supply.
Furthermore, the U.S. is currently in the process of creating a Digital Asset Stockpile that will include XRP. While there is no guarantee that the stockpile will actually be implemented despite an executive order specifying that it should be, it could mean that the government will retain any XRP it obtains via asset forfeitures rather than selling it straight away. Over a long enough period, that could result in a significant portion of the supply outstanding being taken off the market, thereby supporting higher prices.
There's no time to buy XRP like the present. The longer you hold it, the more time there will be for its core value-generation mechanics to increase the coin's price. If these catalysts play out as investors hope, it will be the icing on the cake.
Should you invest $1,000 in XRP right now?
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
