XRP (CRYPTO: XRP) is the native cryptocurrency on the XRP Ledger, a blockchain built by technology company Ripple to enable faster and cheaper cross-border transactions. XRP soared about 500% in the past year, but its price has also declined 15% during the last two weeks, such that the cryptocurrency currently trades at $2.88 as of Feb. 1.
Should investors buy XRP while its price is below (or near) $3? Here are my thoughts.
Under former Chairman Gary Gensler, many pundits argue the Securities and Exchange Commission (SEC) waged a war against cryptocurrency. But recent regulatory changes could be tailwinds for the industry that lead to greater adoption of digital assets.
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The SEC on Jan. 21 formed a cryptocurrency task force that aims to develop a “comprehensive and clear regulatory framework for crypto assets.” The press release acknowledged the SEC has primarily relied upon enforcement actions to regulate cryptocurrency retroactively rather than developing rules.
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President Trump on Jan. 23 signed an executive order titled “Strengthening American Leadership in Digital Financial Technology.” The executive order established a working group to evaluate the potential creation of a nation digital asset stockpile, which could position the government as a major buyer of cryptocurrency.
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The SEC on Jan. 23 rescinded Staff Accounting Bulletin (SAB) 121, a rule introduced in 2022 that required institutions holding cryptocurrency for customers to treat digital assets as liabilities on their balance sheets. Accounting firm Ernst & Young explains that SAB 121 “effectively prevented banks and other financial institutions from holding digital assets as custodians.”
In light of those changes, Morningstar analysts estimate the cryptocurrency market will be worth $7.4 trillion by the end of 2033. That implies 124% upside from the current value of $3.3 trillion, which equates to growth of 9% annually over the next nine years.
I find Morningstar’s prediction quite plausible, and I would expect cryptocurrencies with real utility to realize an outsize portion of the gains. XRP satisfies that condition.
The SWIFT (Society for Worldwide Interbank Financial Telecommunication) network is currently the most popular system for transferring money internationally. But SWIFT typically routes payments through one or more intermediaries, each of which charges fees, which makes transactions costly and time consuming.