This crypto hasn't performed as well as the overall industry in recent times.
The cryptocurrency market has been on an impressive run in the past 18 months, as its market cap has gone from $800 billion to nearly $2.3 trillion today. But not all digital assets have fared as well.
Take Ripple (XRP -4.31%). Its native token, XRP, is up about 39% since the start of 2023 (as of June 30). However, it has tanked 24% this year. Maybe there's an opportunity here for investors to take advantage of the underperformance.
Should you buy this cryptocurrency with $100 right now and hold it through 2024 and beyond?
Standing out
So many cryptocurrencies exist today. The vast majority of them are absolutely useless, while some might even be scams. It's critical for a blockchain to develop some sort of competitive strength so it can stand out. And by doing this, particularly creating a use case, I believe there could be some long-term viability.
This is where XRP tries to shine. The network acts as a connecting channel between two different currencies, bridging the gap to facilitate fast, cheap transactions using the blockchain. This innovation has meaningful potential.
According to the World Bank, there was an estimated $669 billion sent across borders in remittance activity in 2023 to low- and middle-income countries. That is a gargantuan sum. So, it's admirable what Ripple is trying to do.
If the crypto can penetrate even a tiny sliver of this market, being used to send money on a worldwide level, then its price could soar. It's not hard to imagine that demand for XRP would increase in this bullish scenario.
For what it's worth, Ripple has partnerships in place with numerous financial institutions that want to test the technology.
Key risk factors
While XRP stands out in the cryptocurrency space, it still faces some competition. The current financial system already has processes in place to move money across the globe. And this entrenched model isn't going to change quickly, even if XRP is faster and cheaper. Widespread adoption is far from a certainty.
And even when it comes to blockchain technology, XRP faces a direct competitor from JPMorgan Chase. The largest U.S. bank is working on something called Onyx, which essentially does the same thing the XRP network does.
Of course, JPMorgan has a scale advantage. It has the financial and tech resources to keep investing in this project. And perhaps most importantly, the bank has deep expertise and an unmatched standing in the world of finance.
Regulatory developments are another risk to be mindful of. Ripple has been in an ongoing battle with the Securities and Exchange Commission. The agency believes the sale of XRP violated securities laws, while Ripple believes this isn't the case. Question marks about the ultimate outcome could continue to hang over the crypto for a long time.
If this adverse situation ends up working out in Ripple and XRP's favor, it could help set the token up for greater adoption. For example, maybe more financial institutions will want to partner up. Or maybe a spot exchange-traded fund (ETF) specifically for XRP is launched, following in the footsteps of Bitcoin.
Investing perspective
Investors looking to score huge returns might be eyeing XRP as a potential portfolio addition. It might have big upside, but there is a lot of risk and uncertainty as to its ultimate outcome. That's why I'm not a buyer of the digital asset.
However, for some investors, it might make sense to use $100 to invest in XRP as part of a well-diversified portfolio. Just make sure to maintain a long-term perspective to wait for things to play out. And be prepared for the inevitable volatility.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, JPMorgan Chase, and XRP. The Motley Fool has a disclosure policy.
