After rising about 300% during the past 12 months alone, it’s entirely possible that the next 12 months will be even more exciting for holders of XRP (XRP -9.65%).
It’s even conceivable that a trio of new developments could send the coin from its current price near $2.20 to well above $3 within the next three months. Let’s examine each and judge how much of an impact they’ll have on the coin’s price in both the short and long term.
1. Tokenizing real-world assets
The process of tokenizing assets isn’t something that most investors are familiar with, but it’s an important thing to understand in the context of XRP’s present and future. In short, when an asset is tokenized, an entry is created on a blockchain like XRP’s, such that the ownership and attributes of that asset can be tracked via a ledger, and such that the asset can be traded between parties on that chain. Most people have heard of non-fungible tokens (NFTs), and the principle is the same; an NFT is just a set of asset-related data that’s distinct from the quantity of tokens a given cryptocurrency wallet is holding.
XRP isn’t the chain for trading NFTs. However, the technology of its chain does allow for the tokenization of real world assets (RWAs) like real estate, commodities, and in theory pretty much most other stuff you could normally trade on the market. As of mid-February, Ripple, the company that created XRP, is emphasizing the chain’s real asset tokenization capabilities significantly more, likely in hopes of capturing a portion of what could become a gargantuan pot of capital. By 2030, the market for tokenized RWAs could be as large as $16 trillion, according to Ripple.
If even a fraction of those assets were traded on XRP’s chain, it would make for an enormous amount of value changing hands. And that would generate a lot of fees for the network, which could accrue back to the value of the coin.
2. Tokenizing U.S. Treasuries
XRP’s target users are banks and other financial institutions that need to perform international money transfers very frequently. Those same companies tend to hold a lot of different types of assets, which banks and institutions might want to send across borders easily, too — like U.S. Treasuries.
As of late January, via XRP’s collaboration with Ondo Finance, it’s now possible to hold fairly large volumes of tokenized short-term U.S. Treasuries on the chain. Although there was technically an older program that tokenized a small sum of Treasuries, it probably wasn’t large enough to persuade many institutional players to get involved with XRP. Now, there’s a total value locked of about $600 million in Treasuries, which is large enough for banks to transact with at the scale they desire.
That might attract more financial institutions to start using XRP, which will create demand for the coin. At the same time, transactions between banks to trade those Treasuries will generate more fees for Ripple. If there’s sufficient demand, the volume of Treasuries tokenized on the chain will increase, and the fee generation will scale up too.
3. Being included in a national cryptocurrency repository
You’ve probably heard that the U.S. government is considering creation of a national cryptocurrency reserve or repository. Most of the time, Bitcoin is the asset being discussed, but Ripple is currently lobbying for XRP to be included as well.
Inclusion in such a repository, assuming one is ever established, would be very favorable for the coin. First, governments tend not to transact very much with assets that they set aside in reserves and repositories, as there are often legal barriers to doing so. That means XRP would gain a major new holder that probably wouldn’t sell, thereby increasing buying pressure by way of reducing the actively circulating supply.
Second, such a move would probably involve settling the legal and regulatory questions surrounding XRP once and for all. Given that it has been sued by the Securities and Exchange Commission (SEC), that’s no small catalyst. That could be happening anyway as a result of new regulatory policies being implemented right now, but it’s still worth realizing that if the government were ever actually in a position where it was legally obligated to buy XRP, the upside would be tremendous.
So keep an eye on what legislators and regulators are discussing. With the right developments and legal shifts, XRP could be flying above $3 in no time.
