It’s very possible for cryptocurrencies to spend a bit too much time in the spotlight, leaving latecomers to crypto investing to take heavy losses, when having a bit of foresight would have spared them a lot of pain.
In that vein, XRP (CRYPTO: XRP) is currently priced around $2.50 (as of Feb. 13), but is it still worth an investment if its price surges higher than $3 this year? Let’s investigate this question, because in many ways, it isn’t even the right thing to be asking.
XRP’s price today is, like all other cryptocurrencies and publicly traded assets, determined largely by the psychology of the investors buying, selling, and holding it.
People buy and hold assets they think will be worth more in the future; they sell assets they think will be worth less. The fair market value of an asset itself on any given day is just a representation of where the center point is in the endless tug-of-war between buyers willing to pay a bit more for the asset just to hold it, and sellers willing to get a bit less just to get cash instead.
If the price of a digital coin like XRP goes up over time, it’s because there’s more money that wants to acquire the coin and keep it than there is money locked up in the coin that wants to escape into cash. In other words, investors are, on average, more hopeful about getting more money by waiting and holding the coin than they are fearful of losing the equivalent amount of cash. Why would investors think this?
For one, if there’s a solid investment thesis for an asset, which describes how and why the asset will be worth more in the future than it is today, it goes a long way toward getting investors to hold. But think for a moment about what that implies about the price on any given day.
If you thought this means the price itself simply doesn’t matter much, only the sentiment about where it’s going, you’re on the right track. And that’s precisely how you should be thinking about whether to invest in XRP.
Whether XRP is above $1, $2, or $3 is immaterial to whether it can continue to gain in value from any given point. As long as there’s a good set of reasons suggesting that it will continue to produce value, it has a clear runway to continue increasing from whatever price it’s at to whatever arbitrary price point you pick in the future.
That doesn’t mean it’s guaranteed to go up, just that spending time analyzing the price of the coin at any one point in time is much less fruitful than understanding the factors driving its rise, which we’ll get into next.
As it turns out, XRP has a good chance of rising above $3 and beyond in the future because it’s a good cryptocurrency investment.
The coin is used by financial institutions including Santander and JPMorgan Chase to process transfers of money across international borders. Using XRP is useful for these businesses because it enables them to avoid paying hefty international wire-transfer fees, and it allows transactions to close within a few minutes instead of a few days.
It also enables those companies to avoid paying international currency exchange fees, which are levied as a percentage of a transfer’s total value, and which therefore tend to be major expenses.
And that’s why XRP’s blockchain processed more than $5.1 billion in transactions in the 24-hour period ended on Feb. 11. Each of those transactions generated a small quantity of fees that goes toward maintaining and upgrading the network.
It’s clear that there’s a lot of institutional buy-in here already. More adoption is likely on the way, especially if regulators approve new financial instruments that hold XRP in traditional financial accounts, like exchange-traded funds (ETFs).
In other words, there’s ample reason for investors to be optimistic about XRP being more valuable tomorrow than it is today. Jump ahead five or six years, and it might be vastly more valuable, especially if it can continue to beat out competition from other fintechs trying to gain ground in international money transfers.
If you buy it today and hold it for that long, you probably won’t even remember when the price crosses $3. Keeping a healthy long-term view of your investments tends to make you forget what the price was during any given period, especially when you still have evidence that they’ll be worth even more in the future.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and XRP. The Motley Fool has a disclosure policy.
Will XRP Still Be a Buy if It Goes Above $3 in 2025? was originally published by The Motley Fool
