Is XRP a Millionaire Maker?

The cryptocurrency market has been on a slide in recent weeks as investors move away from riskier assets. XRP (CRYPTO: XRP) has now declined to below where it traded before the news that its creator, Ripple Labs, had resolved its long-standing lawsuit with the U.S. Securities & Exchange Commission.

XRP remains one of the largest cryptocurrencies, with a fully diluted market value of $162 billion. It's the native token of the XRP ledger, enabling quicker, cheaper cross-border transactions.

Despite XRP's price sitting more than 50% below its all-time high, the token price has risen by more than 10,600% since 2015. Is this exciting token still a potential millionaire maker?

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The pitch is a good one

In an increasingly digital world and economy, there is an incentive to develop more innovative and efficient ways to move money. That's what Ripple Labs had in mind when it created the XRP ledger, a decentralized blockchain network for cross-border transactions.

The vast majority of cross-border transactions currently use SWIFT, a global messaging network between the world's banks and institutions. Transactions incur hefty fees, and settlement can take hours to days. The fees on the XRP ledger depend on network traffic, but are generally minuscule relative to SWIFT, and settlement can occur in a few seconds.

In addition to its technological advantages, XRP is seeing increased demand from individual and institutional investors. Several spot XRP exchange-traded funds have launched, holding XRP on behalf of investors and giving people a way to invest in the token without direct ownership.

XRP's fixed supply of 100 billion tokens means the price could continue to rise as network activity burns tokens or as investors accumulate them.

But it's unclear whether XRP can disrupt its chief competitor

An estimated 98% of money transfers go through SWIFT's network. That creates a powerful network effect that will take intense, consistent pressure to disrupt. The Ripple Labs litigation lasted five years and put the XRP ledger at a disadvantage, significantly undermining its appeal to institutions during that time.

Additionally, SWIFT isn't sitting still. In September, it announced it was working with institutions to develop its own blockchain-based ledger system. If SWIFT can modernize its network with blockchain technology, it makes the XRP ledger's climb that much harder.

At this point, it's difficult to see the XRP ledger overtaking SWIFT anytime soon. That doesn't mean it's game over, though. Ripple has launched a stablecoin and integrated it into the XRP ledger, which shows that Ripple could continue building on and adding functionality to the network.

XRP is worth owning as a speculative investment with upside if Ripple Labs can continue to create value on its blockchain. But at least for now, it's tough to see XRP delivering life-changing investment returns anytime soon.

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