For cryptocurrency investors that want to own digital tokens with a purpose, XRP (CCC:XRP-USD), marketed by a company called Ripple, is an interesting option.
Indeed, this cryptocurrency is the fourth-largest crypto out there in terms of market capitalization. Thus, investors clearly believe that XRP is a crypto token with lasting power.
That belief is solidly based. Indeed, the ability to use XRP in the real world has made this cryptocurrency stand out. The usefulness of this no-fee, cross-border, international payment tool has left me intrigued about it in the past.
In general, I think cryptocurrencies can generally be put into two buckets. On the one end of the spectrum are cryptocurrencies that are viewed as stores of value or hedges against the global fiat monetary system. Bitcoin (CCC:BTC-USD) is the clear winner in this regard.
On the other end of the spectrum are cryptocurrencies designed for a certain purpose, whether that’s smart contracts with Ethereum (CCC:ETH-USD) or XRP’s international money transfer capabilities. So cryptocurrencies aren’t one and the same.
Here’s more on why I think investors may be onto something with XRP.
Ripple’s Business-First Approach Ought to Intrigue Investors
I like to invest in businesses that produce which are useful and valuable.
Accordingly, I have to agree with Warren Buffett’s views on gold. Owning stores of value with no practical purpose doesn’t really appeal to those looking to compound their wealth using the cash flow growth that typical businesses provide.
Cryptocurrencies don’t necessarily return value to shareholders in the same ways as businesses do. There are exchanges that now pay interest rates on crypto deposits, simulating dividend yields. But for all intents and purposes, these digital tokens aren’t similar to dividend-producing equities at all. They’re really more akin to a digital version of gold.
That said, XRP and a number of other cryptocurrencies help their owners because they are useful. As a result, I can more easily understand their intrinsic value.
The focus by Ripple on creating a cryptocurrency geared towards businesses should entice investors to buy XRP. Accordingly, this is one of the few crypto options I’ve taken a deeper look at lately.
The Bottom Line on Ripple
XRP is an intriguing token that has some real value.
However, like all cryptocurrencies, XRP is highly volatile. In the last few months, it has peaked and valleyed numerous times. Investors who have held onto it have done well.
However, I wouldn’t borrow money to invest in it or bet the farm on it. Those looking to put some money to work in any cryptocurrency today better have a game plan in place. Investing the correct amount in each crypto and ensuring one owns a basket of high-quality cryptocurrencies is really the only way that anyone should invest in them.
Ripple has some serious headwinds, complicating the outlook of XRP. Whether the firm’s situation with the SEC is resolved or not will likely play a big role in the trajectory of XRP over the near- to medium-term. Accordingly, those who buy the cryptocurrency will need to remain on their toes and keep a close eye on any news that affects it .
Those willing to speculate on XRP should feel free to do so, but I’m going to remain on the sidelines.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.