XRP ( XRP -5.34% ) The cryptocurrency XRP, which belongs to the Ripple blockchain, has dropped by over 80% since reaching its highest value in early 2018. Initially, optimistic investors had anticipated XRP to become more popular as various companies started using Ripple’s blockchain for their large payments, money transfers, and currency exchanges. Ripple had stated that its platform could offer its users safe, immediate, and almost cost-free international financial transactions of any scale without the risk of payments being reversed.
A number of smaller financial institutions such as Travelex Bank, Tranglo, and Sentbe turned to Ripple’s network as a more cost-effective option compared to the commonly used SWIFT protocol. Despite this, these institutions primarily utilized Ripple for traditional currency transactions rather than embracing XRP as a payment alternative. In December 2020, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Ripple for generating $1.3 billion by selling XRP tokens, claiming that the sale violated securities regulations due to being unregistered.
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At the same time, numerous investors argued that XRP did not qualify as a genuine cryptocurrency since it did not involve mining with the proof-of-work system. PoW Either by using a protocol or by participating in staking through the proof-of-stake mechanism. PoS Unlike other tokens that follow a protocol, this token pre-mined its total supply of 100 billion tokens before entering the market. It then secured 55 billion tokens in escrow accounts and released them gradually to maintain a stable liquidity and supply.
All these problems, combined with increasing interest rates and the decline in the cryptocurrency market, severely impacted. XRP’s price Nevertheless, I am of the opinion that despite the high risk involved, this token has the potential to transform an initial investment of $1,000 into a substantial sum in the coming years as significant factors come into play.
The most significant short-term driver for XRP
XRP faced a major challenge with the SEC lawsuit, but it ultimately ended in Ripple’s favor in early August. Initially, the SEC requested a hefty $2 billion fine, which was more than the token offering amount. However, the SEC later reduced its demand to $1 billion plus interest. Throughout the legal proceedings, Ripple stood firm on its position to only pay a $10 million fine.
The case concluded as U.S. District Judge Analisa Torres issued a $125 million fine on Ripple. Torres had previously determined that XRP tokens should not be considered unregistered securities, a stance she reaffirmed in her recent decision. With the lawsuit resolved, the price of XRP might potentially increase by the year’s end.
Other significant factors driving XRP
Many investors view the positive outcome of the SEC lawsuit as the primary short-term driver for XRP, but we should also take into account other potential factors. Firstly, Ripple is preparing to introduce its stablecoin (Ripple USD) and $10 million worth of tokenized U.S. T-bills on the XRP ledger in the coming months. Secondly, Ripple is said to be gearing up to enhance the XRP ledger by incorporating new features for decentralized finance (DeFi) development. DeFi applications and interactive unique tokens NFTs The introduction of these new initiatives, in addition to other uses, may increase Ripple’s popularity and help to stabilize the price of XRP.
In conclusion, the potential decrease in interest rates may attract a higher number of investors towards risky cryptocurrencies. Certain experts speculate that the Federal Reserve might lower its standard rates in September to ease concerns of an economic downturn, potentially leading to a significant increase in the value of XRP and other alternative cryptocurrencies.
However, it is important not to overlook the challenges that may arise in the long run.
The price of XRP may reach its lowest point this year, but its potential for growth may be hindered by competition from more efficient blockchains. Ethereum and Solana In addition to the uncertain external factors affecting the market, there is no assurance that the introduction of new services on Ripple’s blockchain will result in an increase in the price of XRP. Despite these unpredictable obstacles, it could be a wise decision to invest $1,000 in XRP from the riskier portion of your investment portfolio until the short-term challenges subside.
