Here's Why I Wouldn't Touch (XRP) Ripple With a 10-Foot Pole

XRP (CRYPTO: XRP) is generally perceived to be a high-upside cryptocurrency, with plenty of potential for long-term price appreciation. But is that really the case?

Right now, XRP is trading around the $1.50 mark. Surprise, surprise, but that's almost exactly where XRP was trading five years ago. So where's all the upside potential? Unfortunately, XRP may never skyrocket in value, and here's why.

XRP vs. Ripple

In the minds of many investors, XRP and Ripple are interchangeable terms. And to a certain degree, that's true. After all, XRP is the token of the Ripple payment network, and the XRP blockchain ledger provides the "rails" used by this payment network.

Image source: Getty Images.

But here's the thing: Ripple is a privately held company, and XRP is a cryptocurrency. Don't confuse the two. Buying XRP is not the same thing as owning equity in Ripple, and that means you won't necessarily benefit from Ripple's soaring valuation.

Instead, XRP is a bridge currency that is used to move money across borders. Say you want to move U.S. dollars from New York to Tokyo. You would first convert those dollars to XRP, and then convert XRP to Japanese yen. See? XRP is really just a "bridge" to get you from point A to point B.

Is XRP really just a stablecoin in disguise?

And that got me thinking. What if XRP is really just a stablecoin in disguise? After all, the role played by XRP is the role also being played by stablecoins -- moving large amounts of money quickly and cheaply across borders.

But stablecoins are superior to XRP in one important way: They always trade for $1. By way of comparison, XRP's value can fluctuate greatly in price. If you're moving a lot of money across borders, wouldn't you rather deal with stablecoins? It makes life easier, and there's less risk.

Recognizing this, Ripple recently introduced a stablecoin -- Ripple USD (CRYPTO: RLUSD) -- that was specifically created for the Ripple payment network. Launched in December 2024, it currently has a market cap of $1.5 billion. So this stablecoin obviously has enormous value. From my perspective, this is value that is being siphoned away from XRP.

How high can XRP go?

So maybe, just maybe, the long-term price of XRP is never going to soar as high as many might think. Once you understand the role played by XRP in global payment networks, it's easy to understand why.

That being said, Ripple is an innovative fintech company that is currently valued at $50 billion. The problem is that buying XRP does not get you direct access to Ripple's upside. If that's what you have in mind, you will need to wait for the much-anticipated Ripple IPO.

Dominic Basulto has positions in XRP. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.