Is Cryptocurrency XRP (Ripple) a Millionaire Maker?

Bitcoin experienced a sharp price drop for most of the past week. The cryptocurrency fell almost 10% from January 7th to January 14th. Bitcoin’s slide was mirrored by altcoins across crypto with Ethereum, Solanaand Dogecoin all lose as much or more than the oldest, most valuable coin.

The decline was driven in part by a warmer-than-expected jobs report released on Friday. This means that the Federal Reserve may delay or reduce further interest rate cuts. Digital assets tend to be perceived as “risk-on” by investors – that is, investments that add risk to a portfolio. In general, when rates fall, investors are more willing to take on risk, while the opposite is true when rates rise. With fewer cuts now expected, risk investments like crypto took a hit.

However, despite the movement in the rest of the market, XRP (XRP 7.56%) managed to gain 3.7% since January 7th. Let’s look at why and then consider whether XRP could be a millionaire maker.

An important deadline is looming

In 2020, XRP’s parent company, Ripple, was sued by the Securities and Exchange Commission (SEC). The regulator claimed the company was selling XRP as an unregistered security, a pretty big no-no. In August 2024, a court ruled mostly in Ripple’s favor, approving a $125 million fine when the SEC originally sought $2 billion.

How is this relevant now though? The SEC appealed the ruling in October, but must still present its evidence if an appeal is to go forward. The deadline to do so is today. Under normal circumstances, there would be little reason to believe that the SEC would fail to meet this deadline. However, the regulator is undergoing an important change in leadership as a result of the election of Donald Trump.

The current chairman, Gary Gensler, is stepping down. Gensler hasn’t exactly been a friend to XRP and crypto in general, but Trump’s pick for his replacement, Pail Atkins, will likely take a different path. Investors appear to believe the SEC will not pursue its appeal further in anticipation of this change in leadership and broader philosophy.

XRP has a valuation problem

While the SEC’s failure to proceed with its appeal by the end of today may certainly lead to a short-term gain, I have my doubts about XRP’s long-term value. This is because the value the market currently assigns to the token seems out of sync with what it can realistically provide in the real world.

XRP is designed to transform banking by drastically reducing costs and increasing the speed of transactions between financial institutions. By 2023, legacy systems cost the industry $193 billion in fees. This is the figure advocates cite to illustrate just how big the opportunity is for XRP. And while the number is impressive, it is completely misleading.

XRP transactions are inherently extremely cheap. They are orders of magnitude cheaper than the old transactions they hope to replace. If this is true, even if XRP captured 100% of the market, the fees charged would be several orders of magnitude less than the current $193 billion paid out to legacy systems. In this light, the current $150 billion market cap for XRP seems disconnected from reality.

The question at hand

Ok, let’s assume I’m wrong though. Let’s assume that XRP is able to continue to grow significantly. Can it reach millionaire status? For our purposes, let’s say it would take a $10,000 investment to turn $1 million in 30 years. However, $1 million in 30 years is only worth about $300,000 today. A true millionaire producer, by today’s standards, would have to turn our $10,000 into $3.3 million—a tall order.

That’s a 33,000% return over 30 years, which equates to an annual rate of 21.3%, more than double the stock market’s historical average. If XRP grew at this rate, by 2065 it would have a market cap of $48 trillion, the same as the 10 largest banks combined (assuming a generous 10% annual growth rate). Do you think XRP can be worth the combined market capitalizations of the 10 largest banks in the world?

Given this, I wouldn’t call XRP a millionaire maker. Not only this, but given its current valuation, I wouldn’t recommend it as an investment at all – not at this price. If you are interested in crypto investment, Bitcoin is a wiser choice.