This Key XRP Metric Just Posted 920% Growth in Just 30 Days. Should You Buy It Right Now?

Price is far from the only metric that investors should be watching with cryptocurrencies. When it comes to predicting how a crypto investment will perform over time, on-chain metrics are frequently the most important drivers that describe its future value.

For XRP (CRYPTO: XRP), one metric in particular surged by 920% in just the last 30 days. While it probably isn't reasonable to expect the price of the coin itself to pull that kind of move, the signal here is doubtlessly bullish. Let's take a beat to think about whether it might make sense to buy some XRP right now.

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What the numbers are really saying

The metric that's up 920% in the last 30 days is the value of tokenized commodities that are being represented on the XRP Ledger (XRPL).

Tokenization is the process of representing ownership of an asset using digital tokens on a blockchain. While it's possible in some cases for those tokens to actually be traded on-chain, the ones we're talking about relative to XRP are just stored there for recordkeeping purposes, and they aren't transferable.

There are $1.1 billion worth of those tokenized commodities whose ownership is recorded on the network, which makes it the second-most popular blockchain in all of crypto for the assets in that segment. There are currently around $7 billion worth of tokenized commodities in existence -- 66% more than there were just a month ago.

Why this isn't as strong a buy signal as it may seem

It's a very good sign for XRP's future prospects that tokenized commodity value is onboarding to its chain. But that's not necessarily a sign that you should buy the coin immediately.

A massive print like 920% growth can also come from base effects, like launching from near-zero, or from a single large issuance, which is what's happening here. A single commodity project issuing tokenized future energy generation credits onboarded to the chain in mid-January, bringing its $861 million to the XRPL all at once for tracking (not trading) purposes. But there was also plenty of ongoing commodity token growth before that bolus was recorded, and also after it. So there's still plenty of real expansion in tokenized commodities happening right now on the XRPL.

So, should you buy XRP right now?

If you're building a diversified crypto portfolio, XRP can certainly play a strong role on account of its strong positioning in tokenized real-world asset management moving forward. More capital being parked on the chain or tracked by the chain will lead to higher demand for the coin, as everyone participating will need to buy and hold some XRP to transact, and to keep their accounts alive. It's worth buying.

Nonetheless, right now is a particularly perilous time to invest in crypto. The crypto market as a whole is falling significantly each day. Once the sell-off abates, it'll be worth starting to accumulate XRP with a series of small investments over time.

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.