If you had invested $6,000 in Bitcoin, the world's largest cryptocurrency, almost 10 years ago, you would have been a millionaire by now. Bitcoin and the cryptocurrency sector have overcome all odds not only to survive, but to thrive. The token recently surpassed $107,000. Several other cryptocurrencies are also doing well, with market capitalizations growing to over $100 billion. One is XRP (XRP -1.90%)currently the fourth largest cryptocurrency sector with a market capitalization of over $140 billion. Anyone who invested in XRP 10 years ago could be a millionaire today. But what about now? Can XRP make you a millionaire from its current level?
What is XRP?
Four software engineers, David Schwartz, Jed McCaleb, Arthur Britto, and Christian Larsen, built XRP and the XRP ledger in 2011, several years after Bitcoin's launch. The four founded a company now called Ripple, run by CEO Brad Garlinghouse.
The purpose of XRP was to improve some of Bitcoin's inefficiencies, such as the network's energy-intensive mining system. While most cryptocurrencies are built to facilitate digital payments, the founders built XRP specifically to make cross-border money transfers more efficient. The XRP ledger can settle transactions in 3-5 seconds, processes 1,500 transactions per second, has lower transaction costs than Bitcoin, and is environmentally sustainable.
XRP price data by YCharts
These characteristics make Ripple and the XRP ledger attractive to mainstream financial institutions looking to facilitate cross-border transactions, with nearly 20 financial institutions partnering with Ripple. Ripple recently launched a USD stablecoin called RLUSD. Stablecoins are digital assets that are pegged to a currency or commodity in order to leverage the properties of digital assets without the inherent volatility associated with most cryptocurrencies. RLUSD reportedly requires XRP tokens as transaction fees.
It is also worth noting that up to 100 billion XRP tokens can be created. Ripple has 55 billion of these locked in an escrow account using the XRP ledger, and the network's transaction processing rules will determine how these tokens are released. Approximately 38 billion XRP tokens remained in escrow as of October.
Legal obstacles likely to be resolved
In 2020, the Securities and Exchange Commission (SEC) sued Ripple, Garlinghouse, and Larsen for engaging in unregistered sales of securities through the sale of XRP in 2013. The crypto community was closely monitoring the case because the outcome could have implications for the SEC. If XRP is considered a security, regulatory jurisdiction over many cryptocurrencies will be strengthened. Many crypto supporters believe that cryptocurrencies should be treated as currencies and supervised by the Commodity Futures Trading Commission (CFTC) rather than the SEC.
A federal judge ruled in favor of Ripple and its founder last year, but the SEC has appealed parts of the ruling. However, President-elect Donald Trump's victory clears the way for a pro-cryptocurrency administration to take office in January. SEC Chairman Gary Gensler is expected to resign once Trump officially takes office, and Trump is expected to nominate crypto advocate Paul Atkins to the SEC board.
Many also believe that a pro-crypto administration and a Republican-controlled Congress will pass legislation that will help the industry grow by clarifying the gray areas that have been holding it back. . Until recently, the SEC lawsuit had been a drag on the price of XRP. It seems likely that this case will be completely closed soon. All cryptocurrencies face a more favorable regulatory environment under the Trump administration.
Is XRP a billionaire maker?
Even if XRP is a billionaire maker, it could take a while for that to happen. Assuming your initial investment is $10,000 and you want to grow it to $1 million over the next 20 years, you would need a total return of 9,900% over the next 20 years, or a compound annual growth rate of 25.9%.
Also remember that money is always worth more today, so $1 million in 20 years will be less than $1 million today. XRP also faces some obstacles, including stiff competition from other cryptocurrencies like Solana, which reportedly has the potential to process 65,000 transactions per second, but is still close to this speed. The speed has not been reached yet.
XRP could make you a millionaire, but I think it's pointless to speculate on a decades-long target price for a volatile cryptocurrency. XRP is one of the few cryptocurrencies that I like, and I think it will continue to rise in price if Bitcoin does. However, it is only worth a small speculative investment at this stage.
