XRP Is Aiming at a $19 Trillion Opportunity. Can It Succeed?
Alex Carchidi, The Motley Fool
5 min read
XRP (CRYPTO: XRP) is quite ambitious for a cryptocurrency, aiming to be a cost-cutting tool for financial institutions making money transfers. Its next act might be even more ambitious than that.
It's already making strides to capture upside from one of the largest financial trends of the next 10 years or so. If it does what it is setting out to do, the result could be trillions more in value stored on its chain, with significant benefits for the coin's holders. But can it hit its target?
This key trend could be the coin's biggest tailwind yet
According to a report published on April 7 by Ripple, the company that issues XRP, and Boston Consulting Group, there's an opportunity in the cryptocurrency sector that will be worth around $19 trillion by 2033.
The goal is to tokenize real world assets (RWAs) onto blockchains. We'll get to what that means in a moment. For now, just recognize that in 2025, there's only an estimated $600 billion of those assets that are tokenized, so a tremendous amount of growth could be on the way.
In short, an asset is tokenized if it's traceable and tradeable on a blockchain like XRP's. Tokenizing an asset is thus the process of linking the asset's ownership and metadata to a specific crypto token.
As for the "real-world assets" part, anything -- commodities, real estate, stocks, cars, and futures contracts, for example -- fits the bill and can be tokenized in theory. So, if someone's house was tokenized, they would be able to sell it or transfer it by making a transaction on the blockchain.
But why are Ripple and Boston Consulting Group so convinced that tokenizing real-world assets is going to result in such a vast amount of those assets living on blockchains instead of as they have been for all of history so far? In a word: convenience. Asset managers using blockchains to track and trade their assets can potentially do so with lower costs, faster speeds, less red tape, and fewer intermediaries compared to how they were doing it before.
So how does XRP fit into the picture? It's already a platform that asset managers and institutional investors are using to hold their tokenized RWAs. More than $1 trillion worth of assets have changed hands on the chain already. And, since it's already offering on-chain trading of crucial RWAs for banks and financial institutions, like U.S. Treasuries, it's a logical place for other asset managers to do business in the future.
Under a best-case scenario, most of the assets that get tokenized over the coming years will be held on XRP's ledger, bringing a vast amount of value to the chain. It will also create demand for XRP itself, as some of the coin is needed to process all transactions.
And because there's a network effect wherein having more volume of assets being traded results in better price settlement for asset traders, it could experience a flywheel effect -- with its early lead just getting larger and larger because competitors won't be able to offer similar efficiency to their users.
Success is possible, but far from guaranteed
Today, XRP is well positioned to attract assets to its chain via tokenization. Nonetheless, this trend is fairly new, and the competitive landscape is far from settled.
XRP is a leader in the RWA tokenization sector so far, but it isn't necessarily the top dog, because specialist players can offer new features to asset managers more rapidly. Likewise, XRP is only starting to get the social proof it needs in the form of buy-in from major financial institutions. Those same users could very easily develop solutions of their own and cut it out of the loop if they detect that the upside from doing so would outweigh the risks of making something new.
What's more, the connection between assets held on its chain and the value of the coin is not as strong as holders might wish, which somewhat limits the upside from hosting tokenized assets. It's undeniable that chains with more assets tend to have main coins that are higher in value.
But in the case of assets like real estate, nobody is about to confuse tracking an asset's value on a ledger with the ledger actually owning the asset and having full control over how its value is used or otherwise distributed.
So even if XRP becomes the home of trillions in RWAs on its chain, don't expect the coin's price to be hundreds of times higher than it is today.
On that note, there is nothing inherently blocking XRP from gaining in value from here as a result of increasing confidence in its asset tokenization platform. As long as it continues to offer the features that its target users need, this trend is a big bullish driver.
Should you invest $1,000 in XRP right now?
Before you buy stock in XRP, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and XRP wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider whenNetflixmade this list on December 17, 2004... if you invested $1,000 at the time of our recommendation,you’d have $495,226!* Or when Nvidiamade this list on April 15, 2005... if you invested $1,000 at the time of our recommendation,you’d have $679,900!*
Now, it’s worth notingStock Advisor’s total average return is796% — a market-crushing outperformance compared to155%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.
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.
