I've been a vocal advocate for XRP, championing its potential as an investment opportunity for quite some time now. But, as with any investment, it's crucial to reassess periodically, especially when new insights emerge. And that's precisely what I'm doing here. I'm becoming a bit more bearish on XRP, and I'll tell you why.
The Value Gap
XRP's original allure, as pitched by its issuer, Ripple, was its role as a bridge currency for cross-border payments. However, the landscape has shifted significantly since then. The emergence of stablecoins, including Ripple's own RLUSD, has rendered XRP's original thesis somewhat obsolete. RLUSD, with a market cap exceeding $1.5 billion, offers a stable, dollar-pegged option for financial institutions, making it a more appealing choice than XRP due to its lack of volatility.
Another investment thesis centers around the XRP Ledger (XRPL) becoming a hub for tokenized real-world assets (RWAs). While the growth in tradeable tokenized assets is real, the demand for XRP remains relatively low. The network's transaction fees, which cost roughly 0.00001 XRP per transaction, are burned after payment, and the total burn since inception amounts to a mere 0.014% of the supply. This means that even with significant activity on the XRPL, the impact on XRP's price would be negligible.
The Disconnect
The core issue that's making me bearish is the disconnect between XRP's investment merits and its success as a financial platform. Ripple's business model doesn't inherently create organic buy demand for XRP. This structural flaw, where the network's success doesn't translate into meaningful price appreciation for investors, is a significant concern.
Why I'm Not Selling Yet
Despite my bearish outlook, I'm not advocating for selling XRP just yet. Ripple has a vested interest in increasing the coin's price and has been investing in XRPL upgrades and finding new potential customers. However, the gap between Ripple's success in attracting capital and XRP's underperformance suggests a structural issue rather than a temporary one.
The Future of XRP
The question remains: Can Ripple address this structural flaw? The odds don't seem high at the moment. The apportioning of transaction fees and supply policies on blockchains are rare changes, and there's no guarantee that Ripple will directly try to improve XRP for holders. As such, investors should proceed with caution, recognizing the potential risks and uncertainties surrounding XRP's future.
