Investors in XRP (XRP-USD) have recently experienced a remarkable period of growth, buoyed by a more favorable regulatory environment under the new administration. This change became especially evident when the U.S. Securities and Exchange Commission (SEC) decided to drop its long-standing lawsuit against Ripple Labs, which had accused the company of selling XRP as an unregistered security. This legal development lifted a significant cloud over the cryptocurrency, leading to an astonishing 394% increase in value over the past year.
Despite this impressive performance, some analysts suggest that the future may not be as bright for XRP. Investor Johnny Rice expresses skepticism about the asset’s long-term prospects, warning that ten years from now, XRP could be valued much lower than current expectations. According to Rice, the prevailing bullish case for XRP is predicated on the assumption that banks will increasingly adopt Ripple’s technology and products, subsequently boosting demand for XRP.
However, Rice points out a crucial flaw in this thesis: banks do not necessarily need to utilize XRP to take advantage of Ripple’s offerings. RippleNet, which serves as the company’s primary product, allows for faster and cheaper financial transactions without requiring the use of XRP. Financial institutions can still achieve efficiency by using traditional currencies while leveraging Ripple’s technology.
Additionally, Rice notes that Ripple’s On-Demand Liquidity (ODL) service does use XRP as a bridge asset for cross-border transactions, but its adoption has primarily been limited to smaller institutions that require liquidity solutions. Major banks, which possess more resources, have not fully embraced this service, leaving XRP’s current utility hampered.
A further complication arises from what Rice sees as a competitive threat originating from within Ripple itself. The company has begun to venture into the stablecoin market, a move that could undermine XRP’s foundational role in facilitating cross-border payments. The introduction of Ripple’s stablecoin, RLUSD, could serve as an alternative bridge asset for international transactions, potentially sidelining XRP. Moreover, with Ripple pursuing a banking charter and investing $200 million to acquire a stablecoin payments firm, Rice interprets these actions as an indication that the company may envision a future where XRP is not central to its ecosystem.
Given these factors, Rice’s outlook remains pessimistic. He concludes, “In ten years, I expect XRP to be a cautionary tale about mistaking a company’s success for its token’s value. While XRP’s price could gain in the short term, I think its returns will seriously lag the market over time.”
Investors are advised to conduct their own research before making any investment decisions, considering various factors that influence cryptocurrency markets.
