Down 31% in 7 Days, Is XRP Still a Buy?

With its price down by 31% during the past week, and crashing by 21% on Feb. 5 alone, XRP (CRYPTO: XRP) is obviously getting hit incredibly hard, along with everything else in the crypto sector at the moment.

Is this still one of the best fintech coins to buy, or is it wiser to hold off for now?

Image source: Getty Images.

Why the price is going down

Despite its abysmal price performance, investors can take heart in the fact that nothing is wrong with XRP itself, nor is its blockchain malfunctioning, nor is there any serious problem with its issuer, Ripple.

Its price is getting hammered as a result of some intense crypto market malaise, which has itself coincided with an incredibly chaotic market that now appears to be turning over as investors pull back from some of the winning trades of the past 12 months, specifically AI stocks and precious metals like gold. Geopolitical and macroeconomic problems are likely making this downturn a bit worse and more widespread than it might be otherwise, but again, cryptocurrencies were in poor condition even before this.

So, in other words, cryptos with perfectly fine long-term narratives, including XRP, are getting crushed as investors avoid riskier assets across the board. But that doesn't make XRP's investment thesis invalid.

Patience is the best course of action

The bullish case for XRP is still intact, and it's as strong as ever.

In short, Ripple, the company that created XRP, is building the XRP Ledger (XRPL) to market it as a platform and tool for financial institutions by making it a highly efficient and low-cost piece of plumbing for institutional users. The idea is that by making an integrated system where users can manage their on-chain capital, access liquidity, hold their crypto in custody, and park their collateral for use in leveraged trading, the XRPL will be an obvious place to do business. And, when users want to take any action that touches the XRPL, they will need to fund accounts with XRP and spend XRP, thereby encouraging its price to rise as they purchase it.

As good as it sounds, nothing in the bull thesis guarantees that the next few weeks will be kind for holders. If macro sentiment continues to worsen, XRP can and probably will fall further, even as its product narrative continues to improve.

If seeing your investment underwater in the near term would push you into panic selling, definitely wait out the storm before buying.

On the other hand, even if you're a more risk-tolerant investor, recognize that the conditions are very poor now -- there probably isn't much to lose by holding off on your purchases for a little while. The long-term picture for this asset is still quite good, but you have a much higher chance of being able to hold it for long enough if you accept that your own psychology might end up fighting you along the way if you buy the coin right now.

Alex Carchidi 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.