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Ripple’s business momentum doesn’t automatically translate into greater demand for XRP as an investable asset.
Ripple’s push into a dollar-backed stablecoin could change XRP’s long-term thesis.
Despite XRP's (CRYPTO: XRP) nearly 40% decline from its July peak, many XRP bulls are still optimistic. Ripple, the company behind XRP, just secured conditional approval for a national bank charter, and with its SEC case behind it, bulls believe the future is bright.
But there's a fundamental problem most investors overlook: Banks can adopt Ripple's technology without ever using XRP. RippleNet delivers faster payments and lower costs, while allowing banks to remain with traditional currencies -- no XRP required.
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Ripple offers On-Demand Liquidity (ODL), which utilizes XRP as a bridge asset for cross-border transactions, but adoption remains limited to smaller institutions with liquidity constraints. The major banks moving serious volume aren't using it.
Image source: Getty Images.
This creates a disconnect in XRP's investment thesis. The core argument has always been straightforward: More banking adoption equals higher XRP demand, which drives the price up. However, when the banks fueling Ripple's growth bypass XRP entirely, that logic no longer holds up.
And Ripple's stablecoin push certainly doesn't help. The company just secured conditional approval for a national bank charter to support RLUSD, its dollar-backed stablecoin. RLUSD could easily replace XRP as the go-to bridge asset in ODL transactions.
I believe most of XRP's value is based on pure speculation and hype -- but hype fades. And when that happens, XRP's price will plummet.
Before you buy stock in XRP, consider this:
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Johnny Rice 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.
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