Should You Consider Purchasing XRP Cryptocurrency While Its Price Remains Below $3?

Now that Ripple, the company behind XRP ( XRP -4.10%), has resolved its legal battle with the Securities and Exchange Commission (SEC) and is awaiting approval for a national bank charter, supporters of XRP believe the token has significant momentum. Considering its impressive surge of nearly 440% over the past year, their optimism is understandable. With XRP still trading below $3, is this a good opportunity to invest?

Ripple's achievements don't guarantee XRP's growth

The bullish argument for XRP is certainly attractive. After enduring years of regulatory ambiguity, Ripple reached a settlement with the SEC in August, potentially opening the door for broader integration into the traditional financial sector—a crucial factor for boosting XRP’s value. The main idea behind investing in XRP has always been that as more banks utilize Ripple’s technology, demand for XRP will rise, driving up its price.

However, the situation is more complex. Many investors overlook a key detail: banks are able to implement Ripple’s payment solutions without ever needing to use XRP.

RippleNet, the company’s most popular offering, allows banks to benefit from faster transactions, lower costs, and improved efficiency, all while continuing to use their own currencies—no need to hold or transact with XRP at all.

Ripple’s on-demand liquidity (ODL) service, by contrast, does utilize XRP as a bridge currency for international payments. With ODL, clients can transfer money to banks in other countries without the hassle and expense of currency conversion or maintaining accounts abroad, using XRP as an intermediary instead.

The challenge is that ODL hasn’t seen widespread adoption among major banks. It’s mainly aimed at institutions facing liquidity challenges, and in terms of transaction volume, it remains a niche product compared to RippleNet.

This means ODL’s impact on XRP demand is limited. While there is some effect, it’s likely not as significant as many investors assume. If Ripple’s technology sees a surge in adoption among banks, it’s more probable this will happen through RippleNet rather than ODL.

Ripple’s stablecoin ambitions add more uncertainty for XRP

Even if ODL usage were to grow rapidly, there’s a bigger issue looming: Ripple’s plans to launch its own stablecoin could undermine XRP’s future, or at the very least, create significant obstacles. The company’s application for a national trust bank charter shows its intention to lead the anticipated surge in stablecoin adoption within banking. This is a strategic move, as stablecoins offer many of the same advantages as Ripple’s current solutions and, according to a Citigroup report, could represent a multi-trillion-dollar market by 2030.

Why is this important for XRP? Ripple’s stablecoin, RLUSD, could take over as the preferred bridge asset in ODL transactions, which would sharply decrease demand for XRP. This scenario could materialize soon, given Ripple’s clear focus on stablecoins, as seen in its charter application and its $200 million purchase of a stablecoin payments firm.

Bottom line: $3 seems overvalued right now

So, is it wise to buy XRP while it’s under $3? My view is that it’s not. While there may be short-term factors that could spark speculative rallies, the fundamental disconnect between Ripple’s progress and XRP’s value remains unresolved. When Ripple itself is developing alternatives to XRP’s main function, it raises red flags for me.

It’s easy to get swept up in excitement, but that rarely leads to favorable results. For those seeking exposure to cryptocurrency, Bitcoin and Ethereum are both stronger choices. They have established histories of delivering value and are more likely to endure over time.