Can XRP Make You a Millionaire? Exploring the Potential of Cryptocurrency Today
If you had invested $6,000 in the world’s largest cryptocurrency Bitcoin roughly a decade ago, you’d be a millionaire today. Bitcoin and the cryptocurrency sector have not only survived but thrived, with Bitcoin recently exceeding $107,000. Other cryptocurrencies have also performed exceptionally well, notably XRP (CRYPTO: XRP), which boasts a market cap of over $140 billion. If you had invested in XRP ten years ago, you might be a millionaire now as well. But can it still provide lucrative returns from current levels?
Understanding XRP
Created in 2011 by software engineers David Schwartz, Jed McCaleb, Arthur Britto, and Christian Larsen, XRP and its ledger were developed shortly after Bitcoin’s launch. The team’s efforts culminated in Ripple, currently led by CEO Brad Garlinghouse.
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XRP was designed to address some issues in Bitcoin, such as its high energy consumption due to mining. Unlike many cryptocurrencies focused solely on digital payments, XRP aims to streamline cross-border transactions. The XRP ledger can settle transactions in just three to five seconds, handles 1,500 transactions per second, and offers lower fees than Bitcoin, making it a more sustainable option.
XRP Price data by YCharts
These features have attracted several mainstream financial institutions, with nearly 20 currently collaborating with Ripple. Recently, the company launched a U.S. dollar stablecoin called RLUSD, which is pegged to the dollar and minimizes the volatility typical of most cryptocurrencies. Notably, transaction fees for RLUSD will require XRP tokens.
It’s important to note that a maximum of 100 billion XRP tokens can ever be created. Currently, Ripple has placed 55 billion in escrow, with roughly 38 billion left as of October, adhering to the transaction rules established by the XRP ledger.
Legal Challenges Facing XRP
In 2020, the Securities and Exchange Commission (SEC) filed a lawsuit against Ripple, Garlinghouse, and Larsen, accusing them of conducting unregistered securities sales through XRP since 2013. The outcome of this case was closely monitored, as a ruling in favor of the SEC could have increased its regulatory authority over numerous cryptocurrencies. Many advocates argue that cryptocurrencies should be categorized as currency, under the jurisdiction of the Commodity Futures Trading Commission (CFTC) instead.
Last year, a federal judge ruled partially in favor of Ripple, but the SEC subsequently appealed. With political changes, including Donald Trump’s pro-crypto administration, there is hope for a more favorable environment for cryptocurrency. SEC Chair Gary Gensler is expected to exit, and there is speculation that crypto advocate Paul Atkins will take over the commission.
As a result, there is growing optimism that pending legislation will clarify regulatory uncertainties previously inhibiting the industry, particularly for XRP. This lawsuit has long weighed on XRP’s price but signs hint at a potential resolution.
Assessing XRP’s Potential Returns
If XRP is poised to make investors millionaires, realize it may require time to materialize. For instance, an initial investment of $10,000 would need to grow to $1 million in 20 years, equating to an astronomical return of 9,900% or a compound annual growth rate of 25.9%.
Additionally, it’s critical to consider that money loses value over time, meaning $1 million in 20 years won’t hold the same buying power as it does today. XRP faces considerable challenges ahead, particularly fierce competition from other cryptocurrencies like Solana, capable of processing up to 65,000 transactions per second, although it has yet to achieve such speeds.
XRP could indeed become a millionaire-maker, yet speculating on long-term price trajectories for volatile cryptocurrencies can be unproductive. While I believe XRP has potential and could rise alongside Bitcoin, it may be prudent to treat it as a minor speculative investment at this stage.
Should You Invest $1,000 in XRP Now?
Before committing to XRP, consider this:
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Bram Berkowitz has positions in Bitcoin and XRP. 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.
