A widely watched coin like XRP (XRP -3.01%) is bound to be immersed in a constant discussion about every single one of its aspects and its relevant metrics.
If you’re thinking about investing in it, or if you’re already holding it, you’re doubtlessly exposed to this chatter. And whether you admit it, it probably affects the way you think about the investment in the crypto, which is designed to unseat legacy providers of international money transfers.
That’s perfectly normal. But there’s one particular figure that gets an undue amount of discussion with XRP, much as with many other leading cryptocurrencies. And in reality, it simply doesn’t matter much, so let’s dive in and get up to speed about why this figure isn’t worth obsessing about.
The much-discussed number not to fixate on
As of midday Feb. 17, XRP’s price was about $2.65. Of the many articles written about the coin, roughly a third reference it surpassing or struggling to surpass various price points, like $3.
Discussions among investors on social media are very much the same. Some think the coin is going to $5 in the next few years, whereas others are convinced that a value of $1.50 or lower is more likely.
There’s one big thing that these discussions are missing that you should understand:Â price is just a number.
It doesn’t say anything about the validity of the investment thesis for the coin, nor does it describe why the coin is likely to be either more valuable or less valuable in the future. There’s no appreciation of how catalysts and other real-world events might represent opportunities for the coin to grow faster, or how they represent risks for it to grow slower — or even decline.
That’s a shame, because for XRP specifically, there’s a lot to discuss. Between its potential inclusion in exchange-traded funds (ETFs), inclusion in a U.S. national cryptocurrency repository (if one is ever created), and the continuing onboarding of many new users to its blockchain (thereby generating more and more fees), XRP is experiencing a lot of momentum right now. It’s true that such momentum makes the price go up, but the number itself doesn’t matter as much as the prospect of the price consistently rising over time as a result of these drivers.
Fixating on the price is the surest way to be looking at where the ball is, rather than where the ball is going to go, which is the most important thing if you want to make money by investing in it.
The long term is probably the only term that matters
Furthermore, it’s problematic that discussions of price tend to be largely short term in nature.
In case you aren’t familiar, XRP stands to gain in value over time as a result of the fees that it captures with each money transfer that its network processes. Each of those fees is only worth a fraction of $0.01 on average. Therefore, it takes a high volume of transfers, and a fair bit of time, for the network to generate enough money to pay for things that would further increase its value, like better technology or more expansive marketing operations.
In other words, when investors fixate on the price of XRP today, or even the price of it in the near future, they’re missing the appropriate framing of the coin as being an investment that’s most likely to be the most profitable over longer time frames. Holding on to it for years and years is a lot easier when you’re not spending your precious attention on whether its price is a nice round number today.
Plus, if you hadn’t noticed, XRP is still a cryptocurrency, not a stock — meaning its price is intensely volatile if you zoom in and examine its performance in any given week or month.
But that volatility is just meaningless noise in the bigger scheme of things. So do yourself a favor and don’t entertain discussions about XRP’s pricing — keep your focus on whether it stands to continue to execute on your investment thesis or not.
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.
