XRP’s High Valuation Raises Questions About Its True Market Fit

Perhaps one of the most successful cryptocurrency post-election, XRP has shot up 370%, surging 370% from approximately $0.50 on November 5th to its current price of over $2.40. With the impressive performance, Ripple’s native coin has outpaced most major cryptocurrencies, propelling it back into the top four cryptocurrencies by market capitalization.

Analysts are split on the regulatory impact of the cryptocurrency’s value and its future growth.

XRP’s long-term prospects face mixed feelings among analysts. Alex Thorn, Head of Research at Galaxy Digital, is skeptical about the positive momentum. In an interview with CNBC, Thorn said that XRP lacks a clear “product market fit” and questioned its high value relative to its actual use cases.

“It’s never really had a clear product market fit, despite a lot of marketing. In general, [it has] pretty low flow, [and is] trading at a huge valuation well above some major corporations,” he said, adding that optimism surrounding the incoming Trump administration is driving XRP’s price more than its underlying fundamentals.

XRP @ $50?

It’s apparent that the cryptocurrency market won big with Trump’s reelection. Bitcoin, the world’s largest cryptocurrency, has repeatedly established new highs post-election. On Sunday, Bitcoin surged past $106,000, up around 54% since Trump’s victory, per CoinGecko.

For Ripple, the new administration is even more important given that the company is entangled in a year-long legal battle with the U.S. securities watchdog, which many believe might keep XRP’s price below $1 for an extended period. Trump’s pro-crypto stance is expected to influence how the Securities and Exchange Commission approaches crypto regulations.

Matt Hougan, Global Head of Research for Bitwise Asset Management, admitted that opinions on XRP’s value and utility are sharply divided among investors and analysts. However, he defends XRP’s ability to maintain community interest throughout various market cycles.

The analyst told CNBC that XRP’s “unique and differentiated” consensus mechanism makes it more cost-effective than Bitcoin’s proof-of-work system or Ethereum’s proof-of-stake model. This allows for faster transaction processing and lower operational costs.

Hougan agreed with Thorn when it came to XRP’s real-world use case challenge. However, he noted that the expected removal of regulatory uncertainties would create a beneficial environment for Ripple to develop its businesses.

Hougan believes that the technology has potential that has yet to be fully realized. Once regulatory conditions improve, we may see new applications and growth for XRP, according to him.

Ripple Set To Debut Its Own Stablecoin

Ripple is close to launching its own stablecoin, RLUSD, after getting approval from the New York Department of Financial Services earlier this month. Having been tested on the XRP Ledger and Ethereum, the product will soon debut on trading platforms, according to Ripple CEO Brad Garlinghouse.

RLUSD is aimed at providing a stable digital currency that can be used for numerous financial transactions, especially cross-border payments. It is set to integrate seamlessly with Ripple’s existing payment infrastructure so that users can benefit from quick transactions and low-cost fees without sacrificing efficiency.

As a stablecoin pegged to the U.S. dollar, RLUSD will maintain its value at around $1. However, according to Ripple’s chief technology officer, David Schwartz, RLUSD may face initial price volatility due to supply constraints.

Schwartz speculated that some buyers might be willing to overpay for the “honor” of making the first purchase on a decentralized exchange (DEX). Tools will reflect these high bids, even if they’re for very small amounts of RLUSD.

He, however, assured the community that the price would quickly return to close to $1 once supply stabilizes. Users are advised not to “FOMO” as this is not an opportunity to get rich.

Once launched, RLUSD will immediately face hectic competition from key players in the stablecoin market, like USDT and USDCT. As of September 16, USDT’s market cap has surpassed $140 billion, now the world’s largest stablecoin, followed by USDC’s $42 billion in market value.