Is It Wise to Purchase XRP (Ripple) While Its Value Remains Below $3?

Is It Wise to Purchase XRP (Ripple) While Its Value Remains Below $3?

The XRP (XRP up 2.48%) cryptocurrency is seeing significant growth lately.

Following a stagnant period or decline for over three years, this digital currency, once known as Ripple, came back to life in November. As of Dec. 17, XRP has climbed an impressive 396% in just six weeks, moving up in the blockchain market rankings. It currently holds the third-largest position in the crypto market based on total market value. Prior to this remarkable surge, XRP was positioned in seventh place.

The $3 price barrier is within reach, only requiring a 12% increase at the current moment. The all-time high of $3.84 from 2018 is also within sight. Is XRP running out of momentum, or is now the perfect time to hop on board this red-hot crypto train?

Building lasting worth for XRP

Sending money across international borders can often be a troublesome experience. High fees, lengthy wait times, and fluctuating exchange rates can add to the frustration. XRP was created to overcome these hurdles, making it simpler to move cash between nations.

XRP functions as the cryptocurrency backbone for RippleNet, a payment service that enables quick and cost-effective transfers of money between nations. A multitude of banking partners in various countries facilitate the currency conversions, creating a seamless and user-friendly international money transfer experience.

XRP gains value in several ways. A small number of tokens are burned to collect transaction fees, which makes the token a bit more scarce and valuable each time a transaction is made. The average cost per transaction fluctuates, typically hovering around 0.002 tokens, or half a cent, as of late.

Additionally, new partner banks joining RippleNet may create a demand for XRP by establishing reserves, and buying and holding XRP for investment purposes can also drive its value. It's worth noting that unlike other cryptocurrencies, XRP does not undergo mining; instead, Ripple Labs produced 100 billion tokens in 2013, with nearly half of that amount currently stored in escrow accounts. The company can choose to release some of these off-market XRP tokens to generate funds or to support the token's value.

What's causing XRP's recent surge?

Ripple Labs plans to introduce an XRP-based stablecoin, named Ripple USD. This coin aims to maintain a constant value of $1 by enabling trades across both the XRP and Ethereum blockchain ledgers. Ripple Labs will back this stablecoin with a USD-based reserve and will integrate it with the global RippleNet system.

The introduction of this stablecoin will further enhance the smoothness of cross-border payments. It may also inspire new business concepts and financial applications, such as foreign exchange markets and token-based transfers of real-world assets. Although your next home or car likely won't be tied to XRP and Ripple USD contracts just yet, the market could change in that direction within 5 to 10 years.

The upcoming stablecoin launch isn't the only factor at play, however. The surge in XRP's price began around the U.S. elections in November, and XRP investors, as a group, have good reasons to be optimistic about the changing political landscape.

Gary Gensler, who served as the Securities and Exchange Commission's (SEC) chair during the previous administration, took a hardline stance on many cryptocurrency issues, including the lawsuit against Ripple Labs. His successor, cryptocurrency advocate Paul Atkins, may drop this lawsuit and champion other XRP-friendly changes. For example, XRP-based exchange-traded funds (ETFs) tied to spot prices may become a reality.

Where could XRP head next?

The number of active XRP accounts is breaking new records, with early December seeing all-time highs. Users are also conducting more transactions per account, which aligns with the price increase.

As such, XRP's rise in value is not entirely unexpected. I also see long-term potential in this useful digital currency. However, volatility in the XRP chart could increase in the next five years, given the overall growth of the crypto market. Although XRP should benefit from this trend, other cryptocurrencies may surpass it in terms of total market value.

I remain confident that XRP will deliver strong returns in the long run and continue to climb the crypto rankings. The global market for cross-border payments totals hundreds of trillions of dollars annually, and even a small piece of that pie could create financial giants out of XRP and Ripple Labs.

Of course, this journey to the stars won't be smooth sailing. There will likely be significant turbulence along the way probably including some painful price corrections. But, yes, XRP has the potential to soar above the $3 per token mark in the future. Purchasing a few economical tokens now could pay off in the years ahead.

In light of XRP's recent surge, investors are considering if this is the ideal time to invest, given that the $3 price barrier is within reach. The introduction of Ripple Labs' XRP-based stablecoin, Ripple USD, could further drive the value of XRP by enabling smoother cross-border payments and inspiring new financial applications.

Read also: