XRP: Buy the Dip?

Key Points

• After hitting a 52-week high in January, XRP is down 30%.

• New spot ETFs have a high likelihood of launching, and could result in more money flowing into XRP.

• Ripple recently applied for a banking license, which could open up more use cases and wider adoption for XRP.

• 10 stocks we like better than XRP ›

XRP (CRYPTO: XRP) investors are understandably concerned right now. Heading into the year, XRP was one of the hottest cryptocurrencies on the planet. But after hitting a 52-week high of $3.40 in mid-January, XRP is down 30%, and currently trades for just $2.35.

However, all is not lost. In fact, this could be a great time to buy the dip on XRP. There are three key catalysts that could propel XRP higher in the second half of the year.

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1. Ripple's bank plans

On July 2, Ripple Labs, the company behind the XRP token, applied for a U.S. bank charter with the U.S. Office of the Comptroller of the Currency (OCC). If this banking application is approved, then Ripple would be able to operate as a federally regulated bank.

This has several major implications. This could pave the way for Ripple to do a lot of exciting things with the XRP token, including the launch of new XRP financial products. This has always been the dream of many crypto enthusiasts: a golden era when banks and other financial institutions offer crypto financial products right alongside traditional financial products.

Image source: Getty Images.

For some time, crypto participants have talked about XRP as "the banker's coin." That's because XRP is primarily used to make cross-border payments and send remittances abroad. In short, XRP is already a cryptocurrency used by banks to do bank-like activities. But XRP has always lacked full regulatory approval to take the next step.

From that perspective, a banking license for Ripple could be huge for XRP. A "banker's coin" needs a bank, right? A banking license would certainly justify a higher valuation, and would likely lead to many more use cases for XRP beyond just cross-border payments.

2. Spot ETFs on the way?

Another big catalyst is the imminent launch of spot XRP ETFs, similar to spot Bitcoin ETFs. Several prominent investment firms have already submitted spot XRP ETF applications, and the current thinking is that the SEC will make a final decision on them by mid-October.

Right now, Bloomberg says there's a 95% chance that they will be approved. And online prediction markets think that there's a 90% chance of them being approved. So it appears to be just a matter of time before these new products launch.

When these ETFs start trading, that could unlock a torrent of new money flowing into XRP. Spot ETFs regulated by the SEC are exactly the type of "safe" investment vehicle that large institutional investors need and want to get exposure to XRP. As a result, J.P. Morgan thinks that as much as $8 billion of new money could flow into XRP.

3. The rise of the XRP treasury company

Finally, there's one more development that has me bullish on XRP. Companies are taking the Bitcoin Treasury Company model popularized by Strategy, formerly known as MicroStrategy, and adopting it for XRP. In other words, these companies are making big plans to add XRP to their balance sheets, as a way of boosting their stock market valuations.

VivoPower International (NASDAQ: VVPR) got the ball rolling in late May, with plans to buy $121 million worth of XRP. And now other companies are following suit. If this trend continues, it could lead to enormous buying pressure for XRP, thereby helping to push up its price.

How high can XRP go?

Just keep in mind: XRP and Ripple are well-known for hype and buzz that never quite delivers as promised.

For example, there continue to be rumors of an imminent Ripple IPO that would send the price of XRP to the stratosphere. There was hype and buzz around Ripple acquiring Circle Internet Group (NYSE: CRCL) just weeks ahead of the stablecoin issuer's IPO in June. And, there is hype and buzz that Ripple might one day topple SWIFT as the preeminent payment network in the world.

The only catalyst that has really pushed XRP higher in the past two years has been the election of President Donald Trump. He came into office with a pro-crypto agenda, and everyone knew what that meant for Ripple and XRP: a clearing out of all the regulatory and legal barriers facing them. That's why XRP soared in price as soon as Trump was elected.

But ever since January, XRP has been a disappointment. So don't get your hopes too high. If XRP manages to reclaim its all-time high of $3.84 before the end of the year, I'd count that as a win.

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