Down 43% over the last year, the cryptocurrency XRP (XRP +1.94%) continues to struggle even though the company behind the banking token, Ripple, keeps notching wins.
So, how can this be? And more importantly, is there a future for XRP?
Image source: Getty Images.
Why Ripple’s success doesn’t guarantee XRP’s success
The bull case hinges on a simple relationship: Ripple’s growth drives demand for XRP. Unfortunately, not only has this thesis always been weak, but it’s getting weaker.
Today’s Change
(1.94%) $0.03
Current Price
$1.34
Key Data Points
Market Cap
$83B
Day’s Range
$1.31 – $1.36
52wk Range
$1.14 – $3.65
Volume
1.9B
That’s because the product that major banks actually use — Ripple’s messaging and settlement layer — doesn’t really interact with XRP at all.
And now, the product that traditionally used XRP as the core “bridge asset” — Ripple’s cross-border payments system — now has an alternative bridge asset: Ripple’s own stablecoin, RLUSD.
RLUSD allows Ripple clients to reap most of the speed and cost benefits without having to deal with the volatility inherent in XRP. That makes it a much more attractive bridge asset for risk-averse banks.
Is XRP still worth buying?
I think Ripple has a real future in institutional finance. But its success does not equal XRP’s success, as many still assume.
And now RLUSD is making this disconnect even worse, and in my view, XRP does not have much of a future. At least not for investors looking for a healthy return.
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.