The Ultimate Cryptocurrency to Buy With $1,000

XRP (CRYPTO:XRP), the native cryptocurrency of the Ripple blockchain, has fallen more than 80% from its all-time high reached in early 2018. Bulls initially expected XRP to gain more traction as more companies route their gross payments, remittances, and foreign exchange transactions through Ripple’s blockchain. Ripple claimed that its ledger could provide its customers with secure, instant, and “virtually free global financial transactions with no chargebacks.”

A few smaller financial institutions, such as Travelex Bank, Tranglo, and Sentbe, have used Ripple’s network as a cheaper alternative to the SWIFT (Society for Worldwide Interbank Financial Telecommunication) protocol that most banks use. However, most of these customers have only used Ripple for fiat transactions, rather than adopting XRP as an alternative payment method. The U.S. Securities and Exchange Commission (SEC) also sued Ripple in December 2020 for raising $1.3 billion through an offering of XRP tokens, claiming that the sale was an illegal transaction of unregistered securities.

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Meanwhile, many investors have claimed that XRP is not a true cryptocurrency because it is not mined using a proof-of-work (PoW) protocol or staked using a proof-of-stake (PoS) protocol like other tokens. Instead, it pre-mined its entire supply of 100 billion tokens ahead of its launch, locked 55 billion of those tokens in escrow accounts, and released those tokens periodically to balance its liquidity and supply.

All of these issues, along with rising interest rates and the crypto winter, have driven down the price of XRP. However, I believe this high-risk token can turn $1,000 into tens of thousands of dollars in the next few years when some major catalysts come into play.

The biggest near-term catalyst for XRP

The SEC lawsuit was the biggest hurdle for XRP, but it eventually resulted in a ruling in Ripple’s favor in early August. The SEC initially sought a $2 billion fine, which would have exceeded the size of the token offering, but later reduced that demand to $1 billion with interest. Ripple insisted it would only pay a $10 million fine.

The case ultimately ended with U.S. District Judge Analisa Torres imposing a modest $125 million fine on Ripple. Torres had previously ruled that XRP tokens could not be classified as unregistered securities, and she reiterated that view in her latest ruling. Without this lawsuit, XRP’s price would have soared by the end of the year.

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Other major catalysts for XRP

While most investors see a favorable resolution of the SEC lawsuit as the biggest near-term catalyst for XRP, we shouldn’t ignore other potential headwinds. First, Ripple plans to launch its own stablecoin (Ripple USD) and $10 million worth of tokenized U.S. Treasury bonds on its XRP ledger later this year. Second, Ripple is reportedly preparing to upgrade its XRP ledger with new tools for developing decentralized finance (DeFi) applications and dynamic non-fungible tokens (NFTs). These new projects, along with other applications, could increase Ripple’s appeal and stabilize the price of XRP.

Finally, lower interest rates will likely drive more investors back into speculative cryptocurrencies. Some analysts believe the Federal Reserve could cut benchmark rates as early as September to allay recession fears, a decision that could send XRP and other altcoins much higher.

But don’t ignore the long-term challenges

The price of XRP could bottom out this year, but its growth could be hindered by competition from faster blockchains like Ethereum and Solana, as well as unforeseen macro headwinds. Ripple’s blockchain expansion with new services is no guarantee that XRP’s price will rise either. But despite these unforeseen challenges, it may be a smart idea to buy $1,000 worth of XRP from the more speculative side of your portfolio before the near-term headwinds dissipate.

Should you invest $1,000 in XRP right now?

Before buying XRP stock, consider the following:

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

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