The ultimate cryptocurrency to buy with $1,000

XRP (XRP -4.97%)Ripple’s blockchain-native cryptocurrency, is down more than 80% from its all-time high since early 2018. Initially, bulls expected XRP to gain more traction as more companies channeled their gross payments, remittances and currency transactions via Ripple’s Blockchain. Ripple claimed that its ledger could offer its customers “secure, instant and near-free global financial transactions of any size with no chargebacks.”

Several smaller financial institutions — including Travelex Bank, Tranglo and Sentbe — have used the Ripple network as a cheaper alternative to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) protocol used by most banks. However, most of these customers only used Ripple for fiat currency transactions instead of adopting XRP as an alternative payment method. The US Securities and Exchange Commission (SEC) also sued Ripple in December 2020 for raising $1.3 billion through an XRP token offering, alleging that the sale constituted an illegal unregistered securities transaction.

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Meanwhile, many investors argued that XRP wasn’t even a true cryptocurrency because it wasn’t mined with proof-of-work (PoW) or staked with proof-of-stake (PoS) like other tokens. Instead, it pre-mined its entire supply of 100 billion tokens before its market debut, locked up 55 billion of those tokens in escrow accounts, and periodically released those tokens to stabilize its liquidity and supply.

All of these issues, along with rising interest rates and the crypto winter, have crushed the price of XRP. However, I believe this high-risk symbol could still turn $1,000 into tens of thousands over the next few years as some major catalysts come into play.

The biggest short-term catalyst for XRP

The SEC lawsuit was the biggest headwind for XRP, but it finally ended in early August with a favorable ruling for Ripple. The SEC initially sought a $2 billion fine, which would have exceeded the size of the token offering. But he later reduced the demand to $1 billion plus interest. Ripple has repeatedly insisted that it will only pay a $10 million fine.

The lawsuit ultimately ended with US District Judge Analisa Torres imposing a modest $125 million fine on Ripple. Torres previously ruled that XRP tokens cannot be classified as unregistered securities, and she reiterated that point in her latest ruling. Without that lawsuit hanging over XRP, its price could rise by the end of the year.

The other major catalysts for XRP

While most investors see the favorable resolution of the SEC lawsuit as the biggest short-term catalyst for XRP, we should not ignore the other potential tailwinds. First, Ripple plans to launch its own stablecoin (Ripple USD) and $10 million in tokenized US Treasury bills on the XRP ledger later this year. Second, Ripple is preparing to update the XRP ledger with new tools for the development of decentralized financial applications (DeFi) and dynamic non-fungible tokens (NFT). These new projects, along with other applications, could expand Ripple’s appeal and stabilize the price of XRP.

Finally, lower interest rates will likely drive more investors to speculative cryptocurrencies again. Some analysts believe the Federal Reserve could cut its benchmark rates as early as September to ease recession fears, and that decision could send XRP and other altcoins much higher.

But don’t ignore the long-term challenges

XRP’s price may drop this year, but its growth could still be marred by competition from faster blockchains such as Ethereum and Solana as well as unpredictable macro-winds. Also, expanding the Ripple blockchain with new services is not guaranteed to raise the price of XRP. But despite those unpredictable challenges, it might be a smart idea to buy $1,000 of XRP on the more speculative side of your portfolio before short-term headwinds dissipate.