Bitcoin experienced a remarkable surge last month, soaring by nearly 40% in just a few weeks. This cryptocurrency heavyweight is inching closer to hitting the six-figure price mark, much to the delight of investors. As has often been the case over the past seven years, Bitcoin is acting like a rising tide that’s lifting all boats. This is proving beneficial for several other cryptocurrencies, including Solana and Cardano, as they echo Bitcoin’s success and see an uptick in their prices.
Among the intriguing alternatives to Bitcoin, XRP stands out. Although XRP isn’t new to the scene—it’s been around since 2012—it’s attracting fresh interest from investors as they navigate the market, especially now that some regulatory challenges are fading away. This leads to a pressing question on everyone’s minds: Could XRP be the game-changer that makes millionaires?
XRP is setting its sights on revolutionizing the banking sector. This token powers RippleNet, a sophisticated payment network that facilitates global financial transactions for banks and financial entities. Essentially, it’s a global settlement system combined with currency exchange and a remittance network. Traditional financial methods tend to be both costly and slow, but by integrating XRP and RippleNet, institutions can cut expenses, speed up transactions, and enhance service quality for their clients. Already in use by certain institutions, XRP boasts a track record for being incredibly fast, cost-effective, and scalable—in terms of handling transactions—especially when compared to Bitcoin.
Advocates of XRP emphasize that its practical, commercial utility is what lends it intrinsic value. However, despite its promising pitch, the situation might be more nuanced than it appears at first glance. The banking industry incurs significant costs, totaling around $193 billion in fees annually as of 2023. If XRP were to become the norm, it could indeed capture a portion of this value. However, the primary incentive for banks to transition from an established standard is cost-saving, implying that even if the shift occurred industry-wide, the resulting revenue could only represent a fraction of that $193 billion.
Another key point to consider is that banks don’t necessarily need XRP to utilize RippleNet. While certain RippleNet functions do require XRP, most of its features can be accessed using traditional currency.
XRP has faced substantial regulatory hurdles, with one of its biggest challenges being its prolonged legal battle with the Securities and Exchange Commission over its classification. The SEC accused XRP of conducting an “unregistered digital asset securities offering.” Recently, the courts ruled in XRP’s favor. Additionally, the SEC’s crypto-adverse chairman, Gary Gensler, is set to step down in January, with expectations that a more crypto-friendly appointee from Trump will follow.
This judicial win and leadership change has certainly contributed to XRP’s recent price spike, but the question remains: is this sufficient for it to be transformative? To assess if XRP could truly create millionaires, we must first define the criteria. For our purposes, let’s suggest that a $10,000 investment must snowball into $1,000,000 over 30 years. While it might not seem as thrilling as achieving this feat in five years, the aim here is steady wealth building through a diversified, long-term investment strategy rather than quick riches—a classic pitfall for financial losses.
Considering inflation, $1 million in 30 years might equate to just $300,000 today. A genuine “millionaire maker” would thus need to turn $10,000 into $3.3 million by today’s standards—a formidable challenge. For XRP to achieve this, it would need to surge from its current price of $2.7 to $891, a staggering 33,000% increase. This translates to an annual growth rate of 21.3% over 30 years, significantly outpacing the historical stock market average. While not outright impossible, the likelihood of this happening is slim in my view.
Taking a broader perspective, the ten largest banks currently hold a combined market capitalization of approximately $3 trillion. Assuming a brisk 10% annual growth rate, this would amount to $52 trillion in 30 years. Under our assumptions, XRP’s market capitalization would have to soar to $51 trillion in the same period. Does it seem plausible that XRP might rival the combined market values of the world’s ten largest banks?
In conclusion, under even the most favorable circumstances, I wouldn’t regard XRP as a reliable means to create millionaires. Despite its recent positive momentum, I’m skeptical about its long-range growth potential given the barriers to its widespread adoption within the banking sector and its present valuation. For those interested in cryptocurrency investments, I believe Bitcoin remains a wiser choice for long-term financial growth.
