Most crypto investments are fairly speculative, and that includes XRP.
The value of any cryptocurrency can change drastically, and XRP (Ripple) (CRYPTO: XRP) is no exception. The coin’s value has spiked about 360% over the past year, but has cooled lately and fallen about 10% over the past three months.
Many cryptocurrencies often rise and fall rapidly on small bits of news or investor sentiment, and their moves are often more drastic than the swings of share prices. This volatility has some investors wondering whether XRP is a good place to invest right now, or if it’s best to avoid the coin.
Here’s why investing in XRP could make sense for some investors, and why others may want to avoid it.
Unlike some cryptocurrency investments, XRP has a real-world use. The XRP blockchain can be used between institutions to process cross-border currency transactions across countries.
XRP’s blockchain can act as a bridge currency in these transactions, transferring XRP to a company in another country, where it’s eventually converted into the recipient’s currency. This all happens within seconds, whereas most currency conversions and transfers take days. XRP also charges very low transaction fees, making it cheaper than some alternatives.
This real-world application has some investors optimistic that XRP could eventually become an important part of cross-country currency transactions. Their optimism is being further fueled by the fact that several XRP exchange-traded funds (ETFs) have recently launched.
While the XRP ETFs aren’t yet available on U.S. exchanges, several Canadian-based ones debuted recently. This follows a trend of other cryptocurrency ETFs launching last year. These ETFs make crypto exposure more accessible by allowing investors to buy shares through traditional brokerages, without managing crypto wallets or private keys. They’re also easy to trade and can offer fractional exposure to high-priced coins, making them a convenient option.
Extreme volatility is the price of admission for all cryptocurrencies. Their tendency to rise and fall rapidly on news events, the moves of other cryptocurrencies, and sometimes no news at all, makes them a highly volatile investment.
What’s more, buying crypto — including XRP — is a mostly speculative decision. While there are real-world uses for XRP, the coin’s value is still closely tied to its popularity among investors. That’s why its value could rise if a U.S.-based ETF launches, but it’s also an indication that investor sentiment is driving its value more than the usefulness of the Ripple blockchain.
