Is XRP a Millionaire Maker?

Key Points

• XRP's price soared after the SEC lost much of its case against Ripple.

• New ETFs could drive its price higher.

• But investors shouldn't expect it to replicate its millionaire-making gains.

• 10 stocks we like better than XRP ›

XRP (CRYPTO: XRP), the native cryptocurrency of the XRP Ledger, has minted a lot of millionaires since its public debut in 2013. It had an earliest trading price of $0.006 per token, but it now trades at about $3. A $2,500 investment made back then would be worth $1.25 million today.

But could XRP turn a fresh $2,500 investment into $1 million again during the next decade? Let's review its past performance and future catalysts to find out.

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Why did XRP's price soar?

The founders of Ripple Labs -- a fintech company that provides blockchain-based money transfers as a cheaper, faster, and more secure alternative to traditional SWIFT (Society for Worldwide Interbank Financial Telecommunication) transfers -- created XRP in 2012.

Ripple used XRP as a bridge currency to accelerate cross-border transfers for its customers. When a money transfer is made between two currencies that are difficult to convert because they lack the adequate liquidity, they're usually converted to a universal currency (like the U.S. dollar) as a bridge -- but that approach can rack up a lot of foreign exchange and bank fees. To reduce those fees, Ripple temporarily converts both currencies to XRP instead of another fiat currency.

Unlike Bitcoin (CRYPTO: BTC), XRP can't be mined. Ripple's founders pre-mined XRP's entire supply of 100 billion tokens before its market debut, and allocated 80 billion tokens to their own company and the other 20 billion tokens to themselves. Ripple subsequently sold those XRP tokens to fund its own expansion, but that capital-raising strategy sparked a lawsuit from the Securities and Exchange Commission (SEC) in 2020. The SEC claimed that Ripple was selling unlicensed securities, and those allegations caused XRP to be delisted from the top cryptocurrency exchanges. Ripple also lost several major customers.

That lawsuit depressed XRP's price until 2024, when it finally concluded with a lighter-than-expected fine for Ripple. A U.S. court also ruled that XRP wasn't an unlicensed security when sold to retail investors. The major exchanges subsequently relisted XRP, several firms submitted their applications for XRP exchange-traded funds (ETFs), and Ripple even applied for its own U.S. banking license. All of those catalysts caused XRP's price to skyrocket more than 500% during the past 12 months.

But can XRP generate more millionaire-making gains?

XRP's future looks brighter than before, but several major challenges could prevent it from replicating its previous millionaire-making gains. First, a lot of XRP's value is pegged to its potential as a bridge currency for cross-border transactions. However, the rise of stablecoins like Tether (CRYPTO: USDT), which are directly pegged to the U.S. dollar, could undermine that strategy. Those dollar-backed stablecoins could be better suited as bridge currencies for cross-border transfers because they're less volatile than XRP.

Second, XRP doesn't natively support smart contracts, which are used to develop decentralized apps (dApps) on Ethereum (CRYPTO: ETH), Solana (CRYPTO: SOL), and other proof-of-stake (PoS) blockchains. Instead, it only provides lightweight "hooks" that can be used to develop simpler programs. It's mulling the development of sidechains (which can add support for Ethereum-based smart contracts), but those plans probably won't bear fruit anytime soon.

Lastly, the Federal Reserve still hasn't cut its benchmark rates this year. Elevated interest rates could drive investors away from riskier investments like cryptocurrencies, and they could stir up macro headwinds for Ripple's customers, which rely on cross-border money transfers.

XRP currently has a market cap of $180 billion. For it to turn a $2,500 investment into $1 million during the next 10 years, its price would need to surge 39,900% to $1,600 and boost its market cap to more than $70 trillion. By comparison, gold currently has a market value of $23.1 trillion, Bitcoin is valued at $2.3 trillion, and Ethereum is worth $461 billion.

Therefore, it's unlikely that XRP would abruptly eclipse those top assets to become the world's most valuable cryptocurrency. It might stabilize and climb higher during the next decade, especially if its ETFs are approved and it expands its developer ecosystem, but investors shouldn't count on it to deliver millionaire-making gains.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.