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XRP's rise in popularity can be tied to several factors, including recent pro-crypto legislation and the potential upside from spot XRP ETFs.
Although XRP looks inexpensive at a little more than $3, smart investors are taking a closer look at the token's market capitalization.
One of the hotter market segments to invest in this year -- besides artificial intelligence (AI), of course -- has been cryptocurrency. As of the closing bell on July 28, both Bitcoin and Ethereum boasted higher returns this year compared to the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC).
One player that has trounced Bitcoin, Ethereum, and the broader stock market is none other than Ripple's XRP (CRYPTO: XRP), which is designed be cheaper and faster than existing technology used in cross-border financial transactions. As of this writing (July 28), XRP boasts a 35% return so far this year.
But with the token trading for less than $5, could more upside be in store? Read on to find out.
I think there are a few factors fueling XRP's gain this year.
First, XRP's issuer, Ripple, had been tied up in a messy lawsuit with the Securities and Exchange Commission (SEC) for years. However, recent court rulings have gone in favor of Ripple and, in turn, removed much of the uncertainty that depressed XRP's price.
In addition, Capitol Hill has introduced a number of crypto bills in hopes of paving the way for a more standardized regulatory framework. I think this legislation has been welcomed by crypto enthusiasts who expect that it will help pave the way for clearer structure in an otherwise volatile industry.
Lastly, I think the market is speculating that the introduction of spot XRP exchange-traded funds (ETFs) could be another catalyst sparking interest in the token -- much in the way that spot Bitcoin ETFs spurred new interest from institutional investors.
XRP might look like an outright bargain at just $3.13. But smart investors understand that an asset cannot be valued solely through the lens of its share price or price per token. To get a more accurate sense of XRP's value, consider that its market capitalization currently hovers around $186 billion.
Looked at another way, XRP's market value is about double that of Coinbase and Robinhood Markets. Moreover, it's several times larger than established fintech darlings such as SoFi Technologies, Chime, PayPal, and Block.
The important nuance to call out here is that XRP might appear cheap given its $3.13 price tag, but the company's underlying valuation suggests outherwise.
