When thinking about buying XRP, the cryptocurrency that runs on the Ripple blockchain payment system, investors should be considering what role Ripplemight play over the course of the next decade. A couple of important considerations factor into this.

Unlike many other popular cryptocurrencies, XRP is not mined. There are 100 billion coins in existence, and they were created by the company Ripple.

Ripple has been fast growing and is currently at a market cap of just under $7.5bn. This means that the currently circulating supply of about 38.5 billion XRP is trading at around $0.2 each. Here’s one basic idea to support buying XRP for the long-run (buy and hold):

With more and more banks using the Ripple protocol, the supply of Ripple will eventually have to be enough to support the total transaction volume of all the players using the system. Since XRP could feasibly replace SWIFT as a payment system due to its lower cost and higher speed, SWIFT figures can be used as an estimate. SWIFT handles about $5trn each day. Therefore, in an extreme case, there could be 100 billion XRP supporting 5 trillion worth of transactions. Since XRP is effectively a bridge currency that acts as a carrier of value from A to B, this would place one XRP coin at 50 dollars. This is, of course, an unrealistic and extreme example (Ripple’s market cap would be $5trn – Apple currently has the highest US market cap at $730bn). But the example serves to illustrate what investors are betting on. If one bought 100 dollars worth of XRP today and it were to rise to 5 dollars per coin, one would have turned a $100 investment into $2500 dollars, therefore a 2500% return.

Fluctuating Price

The number of institutions that have partnered with Ripple has exceeded 100 and is growing rapidly. Yet the price of Ripple has steadily fluctuated around $0.2 for the past months. Why is that? For one, there has been a lot of uncertainty about XRP supply. XRP supply, unlike other cryptocurrencies, is in part controlled by the company Ripple who currently owns more than 60% of all existing XRP coins. The fear is that the company will suddenly capitalize on its position and flood the market with those coins, causing a massive oversupply in the short run. If you are an investor in the company, that would instantly make you a lot of money, but for holders of the coin, it could be devastating.