In the cryptocurrency world, determining an asset's value is usually fairly difficult. But there is one specific type of cryptoasset that's comprehensively understood, and it's an asset of that type that contains a clue about why it's worth being bullish about XRP (XRP 3.62%) over the long term.
It isn't something that you'd be interested in buying for a gain, but you might be able to see yourself holding it anyway. Let's take a beat to learn about it and why it's so important to the coin's future prospects.
CRYPTO: XRP
Key Data Points
This asset is in active use for its intended purpose
XRP's main stablecoin, Ripple USD, is redeemable for $1, and it's backed by cash reserves to ensure that remains the case even during market or monetary disruption. In total, the market cap of the coin is $293.6 million, which is equivalent to the number of dollars stored on the chain in this particular financial instrument. That isn't a very large value in comparison to XRP's market cap of $107.3 billion, but it's important to note that Ripple, the company that issues XRP, can also choose to set aside some of its cash holdings to issue more of its stablecoin as well. So if there's an increasing amount of demand from potential users for stablecoins, the quantity of Ripple USD can be adjusted upward by issuing more.
As of noon on April 9, the 24-hour trading volume of that stablecoin was more than $81.3 million, which indicates a significant portion of the total value turned over during the prior day rather than merely being held and not used for any purpose. This means that holders of stablecoins on XRP's blockchain are actively using their holdings to execute transfers and make payments, just as intended. It also suggests that as new users are onboarded to the chain, especially financial institutions, Ripple will probably need to issue more of its stablecoin so that they have access to enough supply of an instrument in which to store their cash assets.
When Ripple does that, and offers its stablecoin to those institutions, the effect is that their fiat currency flows into XRP's chain, and is stored there. That tends to somewhat increase the price of XRP, as XRP is the asset that represents the totality of its chain, and it's also the asset that's necessary to have on hand to perform any action there. Therefore, whenever the stablecoin's market cap rises, it's a surefire sign to investors that Ripple is making accommodations for more users, and for more value to be stored on XRP's network.
And that's exactly what has been happening since the stablecoin's launch late in 2024, when its market cap was just $53.1 million. The new issuance shows that XRP's chain is getting adoption, which is why its future is likely bright.
Be aware that there are nuances here
Stablecoins aren't the only determinant of XRP's future. It's entirely possible for the coin's value to decline even as more money flows into the chain's stablecoins. Remember, there's a pretty big gap between the coin's market cap and the market cap of its stablecoin, so there are a lot of external phenomena that could outweigh the impacts of big investors loading their cash assets onto the chain.
Furthermore, the policies surrounding stablecoins are still shaping up worldwide. It's likely that Ripple's relationship with regulators in the U.S. will enable it to stay on the right side of any new regulations that they implement over the coming quarters. But it probably doesn't have the same access in every other country that might host investors interested in holding assets on its chain. And that means there could be a disconnect between the promising-looking adoption curve of the chain today and what actually occurs as capital is either allocated to it or forbidden from allocating to it in the future.
But what should investors do with all of this information? Take it as a sign that XRP's feature set is appealing enough to its target demographic that certain core functionalities are getting scaled up to match demand. If the trend continues, and it probably will, the coin's price has a very good chance of rising over the long term.
