As of March 20, XRP's (CRYPTO: XRP) price is around $2.50. But under the right set of conditions, could its price ever reach $100 per coin?
To figure that out, let's do a quick calculation and assess its fundamentals as well as a couple of catalysts that are in play right now.
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Don't hold your breath
The back-of-the-envelope calculation looks bad here.
There are 58.1 billion XRP coins in circulation. At $100 per coin, XRP's market cap would be approximately $5.8 trillion. Today, Bitcoin's market cap is just $1.6 trillion. There's simply no way that XRP's total market value is going to surpass Bitcoin's in the near term.
But there are a handful of factors that suggest XRP will probably be worth more in the future than it is today, even if $100 is not a reasonable price target.
Its core value proposition to holders is that it will be faster and less expensive to perform international money transfers using XRP than with older methods. That will drive banks and currency exchange houses to switch to using it over time, increasing demand for the coin.
At the same time, XRP's chain is gaining new features, like an automated market maker (AMM) and regulatory compliance tooling to make it more appealing to use for those same holders. When paired with other new features, like its tokenization platform for real-world assets, financial institutions will be able to save a lot of effort by holding their assets on its chain.
In other words, over time -- provided that Ripple, the business that issues XRP, continues to upgrade the chain -- there will be an ongoing and evolving set of reasons for a specific demographic to continue buying, holding, and using the coin. Therefore, its future value will tend to increase as a result of the effort being invested, especially in comparison to other cryptocurrencies that don't have as much utility -- or any.
It's not completely impossible
Regardless of the merits of the investment thesis for XRP, it's also exposed to two catalysts in particular that could, with the benefit of time, push its price toward $100, even if it's not an attainable target anytime soon.
The first catalyst is the potential approval of exchange-traded funds (ETFs) that hold XRP. As of March 12, nine asset-manager companies had applied to the Securities and Exchange Commission seeking to offer such ETFs.
If some or all of those applications are granted, it would represent a substantial deepening of XRP's integration into the traditional financial system, bringing a lot of added volume to its chain by that process. Demand for the coin would likely increase substantially.
The second catalyst is the inclusion of XRP in the U.S. Digital Asset Repository, assuming that the repository is ever actually implemented outside of an executive order mandating its creation.
If the terms of the coin's inclusion are similar to that of the Strategic Bitcoin Reserve -- and they likely would be based on the proposals so far -- the U.S. government would retain any XRP it acquired via asset forfeitures. It might also seek to acquire the coin on a budget-neutral basis, though it's unclear precisely what that would mean or if it would actually happen.
The most likely outcome of the repository's implementation, should it occur, is that the government effectively opts to hold some XRP indefinitely, or at least until another presidential administration changes the policy. That would also provide the coin with a tailwind over the long term, as it would mean buyers would be competing for a smaller circulating supply.
In the very long run, whether or not those two catalysts actually happen, no rule prohibits XRP's price from climbing to $100 or more. As long as its value-generating core mechanics remain intact, it might even be inevitable in around 10 years or so, provided that the crypto sector continues to grow as rapidly as it has so far.
You don't need to believe in pie-in-the-sky price targets to buy and hold the coin. Remember: It can multiply in value over the next few years and still be nowhere close to being worth $100, but you probably won't care about that if you have experienced a lot of upside from the run-up. The exact price gain isn't too important as XRP prices are increasing.
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Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and 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.
