XRP’s price is up more than 300% during the past six months.
The token stands out in a world filled with memecoins and tokens with no real-world usage.
XRP’s $135 billion market cap already accounts for a significant amount of future growth.
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It’s been a wild ride for cryptocurrency investors during the past few months — and that’s saying something. Bitcoin surpassed the $100,000 mark, reaching more than $109,000 just 16 years after its creation. While the price has retreated to about $102,000 amid broader uncertainty, investors still appear optimistic that Bitcoin will continue to grow.
That optimism has spilled over into so-called altcoins looking to repeat the extreme successes of the original crypto. XRP (CRYPTO: XRP), in particular, has garnered a loyal following. The crypto token aimed at revolutionizing the banking industry has seen its price rise more than 300% during the past six months alone. Could XRP repeat the success of Bitcoin? Could it be a millionaire-maker?
Let’s step back for a moment and explore what XRP is and why it provides value. The crypto token is designed to act as a bridge between banks and other financial institutions. It helps facilitate international money transfers efficiently and lets banks settle transactions nearly instantaneously. Traditional methods can take days or even weeks, are often complex, expensive, and can involve third parties that complicate the issue further. XRP’s core advantages over legacy systems are speed and minimal cost.
The fact that XRP provides real-world value and a record of use by the industry it is targeting makes it stand out in a market flooded by meme coins. Still, we have to try to quantify that value. Is it enough to justify the enormous $135 billion market capitalization XRP has already amassed?
It’s difficult to come up with a direct comparison, but I think Visa is a good start. The company operates a vast global payment network that is not completely unlike XRP. Yes, there are fundamental differences, but I think it’s still useful. How do the networks compare? Visa handles more than 640 million transactions per day. XRP’s blockchain processes just 1 million per day.
Despite this disparity, Visa’s market cap is only about five times more than XRP’s. Does that seem proportional? It seems to me that either Visa is severely undervalued or XRP is severely overvalued. My money is on the latter.
Maybe this isn’t a fair comparison; let’s try another way to think about it. The claim is often echoed that if XRP is widely adopted, it will capture a significant portion of the hundreds of billions of dollars banks pay in transaction fees each year. The flaw, as I see it, is that the only reason XRP is attractive to banks in the first place is because its cost is minuscule — orders of magnitude less than traditional methods. Then it follows that even if it managed to handle transactions for the whole market, the fees it would collect would be in the hundreds of millions of dollars or low billions. That doesn’t seem to justify the current market cap.
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