Could XRP Reach $10 if It Conquers This 1 Massive Future Market?

Picture a dusty boomtown at dawn. The first crews that pour the sidewalks decide where every storefront door will sit for decades. In crypto's next boomtown, real-world-asset (RWA) tokenization, the pavement is still wet. The chain that's viewed as an attractive place to pour the concrete could collect tolls long after the cement hardens.

That is exactly the bet behind XRP (CRYPTO: XRP). If XRP winds up hosting a meaningful share of tokenized stocks, bonds, and other RWAs, that dream nudges toward higher-probability territory. The coin's price could rise beyond $10 as a result over the long term.

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Here's how this trend could play out to the favor of holders.

The market for tokenization could swell to trillions, and soon

First, let's clarify our terms.

Tokenization is the process by which the record of an asset's ownership is stored on a blockchain as a transferable crypto token. The "real-world" label is a big bucket that contains anything from U.S. Treasuries and corporate bonds to real estate deeds, private-equity shares, fine art, or even bales of hay.

The addressable pie is vast, to say the least.

On June 9, real-world assets tracked on blockchains totaled about $23.2 billion. Boston Consulting Group (BCG) thinks that figure could swell to around $16 trillion by 2030 as illiquid assets migrate to blockchains for cheaper settlement and 24-hour liquidity, not to mention the possibility of better price discovery. Even a modest cut of that pie could move token prices noticeably, and XRP is very likely to be able to grab a slice of the action.

While competitors in the tokenization space, like Ethereum (CRYPTO: ETH), rely on external smart contract stacks for know-your-customer (KYC) and anti-money-laundering (AML) checks to ensure regulatory compliance, the XRP Ledger bakes critical controls into its base layer. That's the primary reason the chain should outperform others in this area long-term.

Image source: Getty Images.

With XRP's ledger, asset issuers can blacklist rogue addresses, freeze assets, or invoke a lockdown of entire pools -- these are features designed to meet the demands of highly regulated money managers of the world's largest institutional investors. These capabilities are set to be expanded on by forthcoming upgrades to the chain, including by adding a native identity layer for institutions that will simplify their tracking of on-chain user accounts.

Critically, the chain's liquidity is improving too.

A protocol upgrade in March activated XRP's automated market maker (AMM) pools, giving large holders a convenient way to earn a yield while tightening spreads for everyone else and increasing the pricing efficiency of transactions. So, when players want to transact with larger amounts, they can now do so with fewer inefficiencies.

Could XRP really go to $10?

With a price of $2.26 today and a circulating supply of nearly 58.8 billion tokens, XRP commands a $133 billion market cap.

Hitting $10 would mean lifting that to roughly $588 billion. Assuming the total real-world asset tokenization pie hits even half of BCG's $16 trillion outlook and XRP captures just 8%, that valuation is not outlandish. Still, to reach such a lofty target, there would almost certainly need to be additional tailwinds for the coin, durably strong market sentiment, and smart upgrades by Ripple, the company that issues XRP.

But what needs to go right in the nearer term? Three things in particular:

• Institutional investors must conduct additional pilot programs and show meaningful volume on the chain.
• A dramatic rise in more real-world asset tokens on the chain over the coming years.
• Increased regulatory clarity about real-world asset tokenization.

On that last point, early comments from the Bank for International Settlements about unified ledgers suggest that a regulatory framework is coming, though it could still be a couple of years out from drafting, never mind finalization. Otherwise, XRP's dominance is not certain, even if it looks significantly more capable than the competition on paper.

Ethereum's head start could become an entrenched lead despite the chain's clunkiness for institutional users. Alternatively, a sudden regulatory reversal or a technical mishap on XRP's ledger could also sap momentum. Investors should temper their price hopes with those realities rather than buying XRP today and hoping that it goes to the moon.

Still, the direction of travel favors institutional-friendly rails like XRP over duct-taped solutions like what Ethereum offers on the real-world asset tokenization front. If XRP keeps solving compliance headaches while others rely on a patchwork of apps, the institutional capital will likely prefer to chase its convenience and the prospect of capturing fees while avoiding the numerous costs associated with its competitors.

Thus, for long-term investors, accumulating XRP and watching token-issuance metrics could be a rewarding way to ride the next growth spurt. Just don't bet the farm on it hitting $10 anytime soon, or perhaps even ever, unless it can demonstrate that it's the leader of the pack in the asset tokenization space.

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Alex Carchidi has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum and XRP. The Motley Fool has a disclosure policy.