Will XRP Possess a Trillion-Dollar Market Cap by the Year 2040?
Despite its volatile nature, similar to other cryptocurrencies, XRP (-11.55%) has seen a significant price growth since its introduction. However, it's currently trading at 84% less than its 2018 peak record high.
With a market cap of $34.6 billion, the question arises: Can XRP potentially surge 29-fold to reach a trillion-dollar value by 2040? Let's delve into the possibilities.
Focus on cross-border transfers
In my humble opinion, most cryptocurrencies are likely to fizzle out, eventually becoming worthless. The creators and developers are often riding the wave of a new tech trend, looking for ways to cash in.
For a cryptocurrency to realistically thrive in the long term, it needs to introduce tangible real-world utility and provide value to people. That's where XRP aims to stand out.
XRP is a digital token designed to expedite cross-border transaction processing. Think of someone in the U.S. wanting to send money to a family member in India, for instance. They would convert dollars into XRP and use the XRP blockchain to send it to the recipient, who would then receive Indian rupees. XRP promises to settle thousands of transactions in seconds, and the cost is significantly less than a penny. This seems like a promising solution to the currently slow and expensive process.
Since $857 billion was sent via remittances in 2023 (according to Migration Data Portal), it's a substantial amount. However, I'd argue that the actual sum of money flowing between countries among corporations and governments is likely to be much higher, in the trillions. If XRP can somehow capture a tiny fraction of this cross-border money flow, the demand for the token and its price could theoretically increase over time.
Potential risks
While XRP aims to disrupt financial services, it's not without its challenges. Some factors investors should consider include:
Regulatory uncertainty: Despite a settlement with the SEC for less than originally proposed, the agency is appealing the decision, which alleged XRP's sales of tokens to institutional investors violated the law. This prolonged legal process can cast a shadow over the cryptocurrency.
Technical risk: As with any new technology, such as blockchain and cryptocurrencies, there's a risk associated with the XRP network. Can it handle an increase in transaction volume and the addition of many more stakeholders without any operational issues in the future? Time will tell.
Can XRP hit $1 trillion?
For XRP's market cap to grow from the current $35 billion to $1 trillion in 16 years, it would require an annualized growth rate of over 23%. Although that's likely to outperform the stock market's return, it's a modest increase compared to XRP's historical performance. As the asset matures, this perspective seems reasonable.
However, I personally do not believe that XRP will achieve a $1 trillion valuation by 2040, a feat that only Bitcoin has accomplished so far. There's too much uncertainty surrounding XRP's ultimate adoption and success, and its performance this year indicates that interest in the cryptocurrency may be waning.
I would only advise those with a high risk tolerance who are bullish on XRP to consider investing in it, particularly as part of a diversified portfolio. However, I'm not one of those investors.
In the realm of finance and investing, the potential for XRP to capture a portion of the vast trillions of dollars in cross-border money flow could theoretically boost its demand and price over time. This is driven by XRP's role in facilitating quick and cost-effective cross-border transactions, a service that is currently in high demand and expensive.
In contrast, the regulatory uncertainty surrounding XRP, such as the ongoing legal tussle with the SEC, and the technical risks associated with managing a significant increase in transaction volume, pose challenges for XRP's ambition of hitting the $1 trillion market cap.
