Bitcoin surged during the last month, rocketing up nearly 40% in a few short weeks. The granddaddy of cryptocurrency is approaching the six-figure price mark as investors rejoice. As was the case with many runs during the last seven years, Bitcoin seems to be the tide lifting all boats; coins from Solana to Cardano are seeing a boost in price, mirroring Bitcoin's own success.
One of the most intriguing altcoins is undoubtedly XRP (CRYPTO: XRP) . Although it's far from new -- the coin has been around since 2012 -- XRP is gaining in popularity as new investors enter the market and regulatory headwinds that have plagued the crypto begin to shift. So, with all the excitement, let's consider: Is XRP a millionaire maker?
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XRP is taking aim at the banking industry
XRP is the token used by RippleNet, a payment network designed to help banks and financial institutions move money around the world. It is essentially a global settlement system, currency exchange, and remittance network all rolled into one. Traditional methods can be costly and slow. By using XRP and RippleNet, these institutions can save money and time and better serve their customers.
XRP is already used by some institutions, and it has a proven track record. It is lightning fast, dirt cheap, and can scale -- in crypto, this refers to how many transactions the network can handle before slowing -- very well, especially compared to Bitcoin.
XRP's proponents argue that this very real, commercial application makes it inherently valuable.
That all sounds great, but it may be a bit more complicated
The pitch makes a ton of sense at first blush. The banking industry pays hundreds of billions of dollars in fees each year, about $193 billion in 2023. If XRP can become the standard, it will capture that value. Here's the problem. First, the primary reason that banks would take on the risk of transitioning away from a proven standard is to save a significant amount of money. So, even if the entire industry switched, the revenue would necessarily be a fraction of that $193 billion.
An even more fundamental issue is this: XRP doesn't need to be adopted for banks to use RippleNet. Although some specific functions require XRP to be used, the majority of RippleNet's features can be paid for using plain old currency.
XRP has less to worry about from regulators
One of the biggest factors weighing on XRP's value for years was its ongoing fight with the Securities and Exchange Commission over how it is classified. The regulator sued XRP for allegedly facilitating an "unregistered digital asset securities offering." The courts recently ruled in XRP's favor. Now, the tough-on-crypto chairman of the SEC, Gary Gensler, has said he will step down in January. Trump is expected to nominate a crypto-friendly replacement.
This is definitely part of XRP's recent explosion in price, but is it enough?
The question at hand
Before we can answer whether XRP is a millionaire maker, we need to define that, as it's a bit vague. For the purposes of this article, let's say it would need to turn a $10,000 investment into $1,000,000 in 30 years. I know that may not be as exciting as, say, five years, but remember, we're not here to get rich quick -- a surefire way to lose money. We want to aim for a diversified portfolio held for the long term.
Back to our assumptions -- we can't forget about inflation. $1 million in 30 years is only worth about $300,000 today. A true millionaire maker, by today's standards, would need to turn our $10,000 into $3.3 million -- a tall order.
For XRP to do so, it would need to grow from today's price of $2.7 to $891, a 33,000% return. Over 30 years, this works out to an annual rate of 21.3%, more than twice that of the stock market's historical average. Although this wouldn't be strictly impossible, I would venture to say it's probably not going to happen.
Let's look at it another way. The combined market capitalization of the 10 largest banks is currently about $3 trillion. If we assume a generous 10% annual growth rate, that will be $52 trillion in 30 years. XRP will have grown to a market capitalization of $51 trillion in that time, given our assumptions. Do you really believe it could be worth nearly the same as the combined market caps of the 10 largest banks in the world?
So, I will confidently say that I would not consider XRP to be a millionaire maker under the best circumstances. In fact, despite its recent success, I am dubious of its long-term growth prospects, given the barriers to adoption in the banking industry I discussed and its current valuation. If you are interested in crypto, I think Bitcoin is a much smarter place to park your money.
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