What seemed impossible just a year ago is now reality. And no, this isn’t about the Pentagon’s bizarre decision to scrub Enola Gay’s photos over a mix-up with the word “gay.” We’re talking about a huge development in the crypto space.
On Thursday, a day before hosting a crypto summit at the White House, Donald Trump signed an executive order to establish the much-talked-about Strategic Bitcoin Reserve. The order also created a US Digital Asset Stockpile under the Treasury Department, setting the stage for government oversight of various other cryptocurrencies.
One of the first cryptocurrencies to make the cut is Ripple (XRP). So, with the U.S. government warming up to digital assets and XRP pulling back from recent highs, might now be a good time to enter the fray?
Investor Johnny Rice points out that amid a sea of meme coins that offer no real value, XRP distinguishes itself with a practical and proven use case. Designed as a bridge asset, it streamlines payments between banks and financial institutions, particularly in cross-border transactions where currency exchange poses challenges. Traditional financial systems are often slow and expensive, with international payments taking days or even weeks to process. XRP, on the other hand, enables near-instant settlements at a minimal cost, completing transactions in mere seconds for just fractions of a cent.
XRP’s real-world utility is evident, then, as financial institutions are already using it. “However,” Rice goes on to say, “investors need to try to quantify that value. After all, even at its current price around $2.50, XRP’s market capitalization sits just south of 140 billion dollars — that is quite a large market cap.”
Rice thinks Visa serves as a useful comparison here since its payment network is well-known across the globe. Visa processes more than 640 million transactions daily, whereas XRP’s blockchain handles roughly 1 million. Despite Visa’s $700 billion market cap being five times larger than XRP’s, it facilitates 640 times more transactions. While Rice concedes that this example is not necessarily a direct comparison, it is still illuminating.
“It seems to me that XRP’s current valuation is overly generous, to say the least,” Rice says.
There’s another way to look at it. XRP supporters argue that if it captures a large share of the market, it could tap into the hundreds of billions banks pay in transaction fees. However, the key appeal of XRP is its low cost, its being significantly cheaper than existing methods. As a result, even if XRP dominated the market, it would likely generate only hundreds of millions, not billions, in fees.
“Is that enough to justify a market cap of $140 billion?” asks Rice, “I don’t think so,” he answers.
And while it’s true the token could surge on future events or hype, Rice expects the gains will be short-lived.
“The underlying issue of overvaluation remains and eventually, the hype will fade, bringing the price back down to earth,” the investor concludes. “So, do I think now is the time to buy XRP? I do not.” (To watch Rice’s track record, click here)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.