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Key Points
XRP's recent price is about $2.55, but during the next couple of years, there's a real chance that it could roughly double to reach $5 or higher.
For that to occur, three things in particular need to happen. Let's examine each so that you can decide whether to invest as these issues play out.
1. Ripple builds out the financial value chain even more
Ripple, the company that issues XRP, is also responsible for developing features and platforms that the XRP Ledger can offer to its target users: institutional investors and international banks needing extensive cross-border money transfers. For a cryptocurrency like XRP to provide value, it must address pain points, making core tasks more convenient. This is what Ripple envisions for XRP.
XRP's ledger already supports critical assets for the financial industry, like stablecoins, and offers the ability to trade and hold real-world assets like U.S. Treasuries. Ripple recently acquired a prime broker to enable stablecoin-backed lending, with some transactions cleared using XRP.
Banks using XRP can benefit from faster transaction closing times if they choose to use Ripple's broker, which, when paired with the ability to borrow using stablecoin holdings as collateral, enhances convenience. Ripple aims to expand its systems to offer more capabilities that encourage users to utilize XRP's chain.
As a result, this could significantly increase the price of the coin over time.
2. Institutional and sovereign adoption accelerates
Many banks and institutional investors are testing XRP to replace older, slower, and more expensive money transfer technologies like SWIFT. Over time, more entities are likely to shift their capital to XRP's network, storing it there, boosting the coin's value and saving on fees. Increased adoption by financial businesses drives the demand for the coin.
Some countries, like Bhutan, are exploring XRP for potential central bank digital currencies. If successful, issuers would need to buy and hold XRP for transfer fees. Other countries, like the U.A.E., have already adopted the network for payments with stablecoins.
When larger players adopt XRP or its network, it creates ongoing traffic and attractiveness that may encourage others to follow, as transfers between wallet holders are negligible in cost.
3. Regulatory and policy tailwinds continue to strengthen
Ripple and XRP previously faced numerous lawsuits from U.S. regulators, which depressed the price and deterred institutional adoption. However, regulators have since dropped those lawsuits. With XRP's inclusion in the potential National Digital Asset Stockpile in the U.S., it might gain a regulatory and policy boost soon.
Exchange-traded funds (ETFs) holding XRP may be approved by the Securities and Exchange Commission, likely causing asset managers to acquire more XRP. This would drive more trading volume to the network, supporting higher prices. These changes increase the chances of the coin reaching $5 in the near term.
This article has been published on fool.com via Yahoo News.
