XRP (XRP -1.69%) is a coin with no shortage of attractive features for investors. Even if you can only commit a relatively small amount of capital, like $1,000, there’s likely still a significant amount of upside that’s worth capturing.
These days, there always seems to be a new reason to buy this coin. Here’s the latest one.
Real users are flocking to execute transfers with this coin
On Feb. 11, Ripple, the company that develops XRP, signed a major new agreement with Unicâmbio. That’s a Portuguese currency exchange business that processes payments in both Portugal and Brazil, as well as processing transfers between those two countries. Now, the XRP coin will be able to harvest fees from the volume of those transfers.
While the volume of the new transfers being performed with XRP is unlikely to be a major addition to the $4.2 billion in 24-hour volume it posted as of Feb. 13, at least not immediately, the point is that this coin is worth buying because real-world users are eager to onboard themselves onto the network, rather than continuing to use the legacy systems that they’re accustomed to.
That makes complete sense, given that older methods for processing cross-border money transfer transactions can cost tens of dollars and take multiple business days to settle, whereas XRP’s transactions cost fractions of a cent and process within seconds. Financial institutions that deal with a lot of those transfers can realize a tremendous cost savings opportunity by switching to XRP.
Importantly, Unicâmbio isn’t even the first financial institution to start using XRP in Portugal, or in other parts of the E.U. But the fact that it’s now using XRP means that it can interact with all of the others on the XRP network more efficiently. That’ll generate more volume for XRP, and more fees as well.
Those fees could then be invested in upgrading the network, or in marketing the coin to new users elsewhere in the world where there are a lot of transfers still being made with older and worse systems. So, there’s a very beneficial flywheel effect going on here that’s a core part of this coin’s investment thesis, and it isn’t showing any signs of slowing down.
This still isn’t a risk-free investment
This latest addition to XRP’s list of users is far from the only positive development lately. It may soon be included in exchange-traded funds (ETFs), and perhaps even in the proposed U.S. national cryptocurrency reserve, should that come to pass.
But there’s no such thing as a perfect investment, and that’s true for XRP too. Even if you’re only planning to put $1,000 at risk, a few issues could put a serious dent in XRP’s price, if events play out in unfavorable ways.
Take the ongoing uncertainty surrounding the implementation of tariffs in the U.S., for example. If such changes to trade policy result in less trade to the U.S. or globally, and therefore less need to transfer money from one country to another, there won’t be as much volume driven to use XRP. Nor will users feel such a burning need to start using the system instead of the alternatives.
Likewise, if the tariffs cause the value of the U.S. dollar to increase, it might discourage investors from holding XRP. There would be fewer reasons to hold a somewhat risky cryptocurrency in comparison to a supposedly safer investment like gold or dollars.
There’s no guarantee that these bad outcomes will occur, and they don’t actually detract from the thesis for buying XRP for the long haul, even if they suggest that the coin could face some external headwinds for a while. Therefore, it’s still a good idea to buy this coin today, provided that you’re willing to hold it for many years. The more time passes and the more the network grows, the more it should become the obvious choice for financial institutions looking to upgrade their systems. Therefore, it will probably bring in more cash to finance further additions and expansions.
Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.
