If you had invested $6,000 in the world's largest cryptocurrency Bitcoin roughly a decade ago, you'd be a millionaire today. Bitcoin and the crypto sector have overcome all odds not just to survive, but to thrive. The token recently surpassed $107,000. Several other cryptocurrencies have done well and grown to market caps exceeding $100 billion. One is XRP (CRYPTO: XRP) , which currently has the fourth-largest market cap in the crypto sector at more than $140 billion. If you invested in XRP a decade ago, there is a chance you're a millionaire today. But how about now? Can XRP make you a millionaire from current levels?
What is XRP?
Four software engineers, David Schwartz, Jed McCaleb, Arthur Britto, and Christian Larsen, built XRP and the XRP ledger in 2011, a few years after Bitcoin launched. The four formed the company now called Ripple, run by Chief Executive Officer Brad Garlinghouse.
The purpose of XRP was to improve some of the inefficiencies in Bitcoin such as the network's energy-intensive mining system. While most cryptocurrencies are built to foster digital payments, the founders specifically built XRP to make cross-border transfers more efficient. The XRP ledger can settle transactions in three to five seconds, process 1,500 transactions per second, has lower transaction costs than Bitcoin, and is more environmentally sustainable.
These attributes make Ripple and the XRP ledger attractive to mainstream financial institutions seeking to facilitate cross-border transactions, and close to 20 financial institutions are working with Ripple. Ripple also just recently rolled out a U.S. dollar stablecoin, called RLUSD . Stablecoins are digital assets pegged to a currency or commodity to take advantage of the characteristics of a digital asset without the inherent volatility associated with most cryptocurrencies. RLUSD will reportedly require XRP tokens for transaction fees.
It's also worth noting that a maximum of 100 billion XRP tokens can be created. Ripple has locked 55 billion of these in escrow accounts using the XRP ledger, and the network's transaction processing rules dictate how these tokens are released. Roughly 38 billion XRP tokens remained in escrow as of October.
Legal roadblocks likely to clear
In 2020, the Securities and Exchange Commission (SEC) sued Ripple, Garlinghouse, and Larsen for conducting an unregistered sale of securities through the sale of XRP in 2013. Crypto stakeholders kept a close eye on the case because the outcome could have given the SEC more regulatory jurisdiction over many cryptocurrencies if XRP were deemed a security. Many crypto proponents believe cryptocurrencies should be treated as currencies and overseen by the Commodity Futures Trading Commission (CFTC) rather than the SEC.
A federal judge ruled in favor of Ripple and its founders last year but the SEC appealed parts of the decision. However, President-elect Donald Trump's victory has paved the way for a pro-crypto administration come January. SEC Chairman Gary Gensler plans to step down once Trump formally takes office and Trump plans to nominate crypto advocate Paul Atkins to run the SEC.
Many also believe that the pro-crypto administration and Republican-controlled Congress will pass legislation that clarifies gray areas that have previously held the industry back and will help it grow. The SEC lawsuit has been an overhang on XRP's price until recently. It looks more likely the case will soon end once and for all. All cryptocurrencies face a more favorable regulatory backdrop under Trump.
Is XRP a millionaire maker?
Even if XRP is a millionaire maker, it would likely take some time to play out. Assuming you can make an initial investment of $10,000 and want it to grow into $1 million during the next 20 years, that would require a total return of 9,900% or a compound annual growth rate of 25.9% for the next two decades.
Let's also remember that money is always worth more in the present, so $1 million in 20 years is less than $1 million today. XRP also faces several roadblocks including stiff competition from other cryptocurrencies like Solana , which supposedly has the potential to process 65,000 transactions per second, although it hasn't achieved anywhere close to this speed just yet.
XRP could be a millionaire maker, but I find it pointless to speculate on multidecade price targets for volatile cryptocurrencies. XRP is one of the few cryptocurrencies I like and I think it will continue to move higher if Bitcoin does. However, it's only worth a small speculative investment at this stage.
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