Could Buying XRP Today Set You Up for Life?

With prices down by about 18% during the past 12 months, XRP (CRYPTO: XRP) has followed the broader cryptocurrency industry in a slump as the asset class gives back much of the gains it enjoyed in late 2024. Donald Trump's presidential election victory turned out to be a buy-the-rumor, sell-the-news scenario where the market boomed on speculation that he would win, only to begin selling off when he actually won.

That said, the macroeconomic outlook still looks favorable as regulatory and political wins continue to add up. Let's dig deeper into the pros and cons of XRP to decide if this utility-focused token could set you up for life.

Regulatory and political wins are adding up

Cryptocurrency is a unique asset class because, unlike stocks or bonds, it is generally not tied to any real-world businesses that can generate profits or cash flow -- nor do these digital assets have industrial or cosmetic uses as precious metals do. Cryptocurrencies are only worth what other people are willing to pay for them, and the industry's success depends on public trust and mainstream acceptance.

The Trump administration has helped support adoption through legislative changes, such as the passage of the Genius Act, which established a framework for regulating dollar-pegged stablecoins. This move helps legitimize the entire asset class. But perhaps more importantly, the government has pivoted away from lawsuits and punitive regulation. This change helped XRP's developer, Ripple Labs, settle its long-running lawsuit with the Securities and Exchange Commission (SEC) over allegedly selling unlicensed securities to institutional investors.

While Ripple Labs was required to pay a fine of $125 million, the closure is a plus for XRP from an investor's perspective because it removes an element of uncertainty that markets generally dislike.

Furthermore, the end of the lawsuit could open the door for more risk-averse institutions like pension funds, insurance companies, and university endowments, which would have been less likely to bet on an asset like XRP when they were unsure about its regulatory classification. Institutional investors generally have deep pockets and a longer-term strategy than retail investors, so their presence in the XRP market could help support long-term growth and reduce volatility.

Ripple Labs is a difference maker

Image source: Getty Images.

Most cryptocurrencies pride themselves on their decentralization and anonymous developers (for example, to this day, no one knows exactly who created Bitcoin). But XRP takes a very different approach. Its development team, Ripple Labs, continues to play a significant role in the token it created. And this could impact long-term performance.

Recently, Ripple Labs has been expanding its ecosystem of digital assets to include a dollar-pegged stablecoin called RippleUSD. This asset is separate from XRP, but it shares the same blockchain ledger, which means transaction fees will be paid in XRP, with a portion of those digital coins removed from circulation through a process called burning. The developers are also making an aggressive push into mainstream finance.

In July, Ripple Labs applied for a U.S. national bank charter in a move that will boost trust and legitimacy while also making it easier to operate its stablecoin platform. In November, CNBC reported that the organization had embarked on a $4 billion acquisition spree, which involves buying everything from software companies to brokerages. And according to Chief Executive Officer Brad Garlinghouse, Ripple is lending out its XRP ledger technology to other companies to help them build out their own digital assets.

Can XRP set you up for life?

Despite looking cheap at $2 per unit, XRP is the fifth-largest cryptocurrency with a market cap of $125 billion. That means investors shouldn't expect life-changing returns in the short term. That said, an improving regulatory environment coupled with XRP's active development team could lead to strong long-term performance.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and XRP. The Motley Fool has a disclosure policy.