-
XRP (CRYPTO: XRP), now hovering just below $1.50, deserves credit for having genuine utility in a market filled with meme coins and outright frauds. Created by Ripple, the token was designed to enable faster, cheaper transactions between financial institutions, especially across borders.
Partnerships with major banks, like Bank of America and Santander, show Ripple is doing something right.
There's a key difference in Ripple's products
The bull case has always been simple: The banking system's adoption of Ripple's technology will drive XRP demand. But in my view, this misunderstands how banks actually use -- or don't use -- Ripple's products.
Ripple offers two core products. Though they've been recently unified as features under the umbrella of "Ripple Payments," I'll use their former names for clarity.
RippleNet is a settlement system that allows for faster and cheaper transactions, improving on legacy systems. But it is essentially a messaging service, and banks typically use it without ever touching XRP. This is the service the big-name banks like Bank of America have experimented with or adopted.
On-Demand Liquidity (ODL), on the other hand, actually uses XRP as a "bridge asset" for cross-border transactions. When, say, sending funds from a bank in the U.S. to a bank in France, ODL converts the dollars to XRP and then into euros.
Bulls argue that growing ODL adoption will drive demand for XRP, but this doesn't hold up -- at least enough to move the needle -- for two reasons:
Stablecoins could pose a threat
And there's another wrinkle: Stablecoins have quickly found a footing within traditional finance and banking systems, making them more efficient while providing more stability than XRP. And with recent legislation, their role within the system is only likely to grow.
Ripple recognizes this. That's why Ripple has undergone a rebranding and made several key acquisitions, including the $200 purchase of RAIL. It's clear Ripple wants its own stablecoin, RLUSD, to be a major player in the industry. Ripple's own website now prominently features "integrate stablecoin payments into your business."
That's a problem for XRP's value. RLUSD can function as an alternative bridge asset in ODL transactions and erode its already limited demand pressure.
Is XRP a buy going forward?
In five years, Ripple will likely be a thriving payments infrastructure company, even more so than today. RLUSD will probably have gained meaningful traction as a bridge asset for cross-border transfers.
But even if Ripple's products genuinely transform cross-border banking, I don't think XRP holders will benefit from it. In five years, I see it having struggled to keep up with the rest of the market -- or worse.
Should you buy stock in XRP right now?
Before you buy stock in XRP, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and XRP wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $414,554! Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,120,663!
Now, it’s worth noting Stock Advisor’s total average return is 884% — a market-crushing outperformance compared to 193% for the S&P 500.
This article has been published in fool.com via Yahoo News.
Where Will the Cryptocurrency XRP Be in 5 Years?
Here's why Ripple's success might not translate to XRP gains over the next five years.
finance.yahoo.com
