Can XRP (Ripple) Make You a Millionaire?

Long-term investors in XRP (XRP -2.24%), sometimes called Ripple after the company that developed it, have endured stomach-churning volatility.

Long-term investors in XRP (XRP -2.24%), sometimes called Ripple after the company that developed it, have had to endure some stomach-churning volatility.

Cryptocurrency prices are prone to large swings to begin with, and a lawsuit between XRP's developer and federal regulators has clouded the token's prospects since late 2020. But those who have held on to it have done well: XRP's price has risen roughly 15,000% during its lifetime, including more than 300% since the election. The Trump administration has taken a more supportive stance toward cryptocurrencies, which has bolstered sentiment for XRP and other tokens.

Today, it is the world's fourth-largest cryptocurrency by market cap. Can XRP (Ripple) make you a millionaire based on its recent price, or is this token running out of steam? Here is what you need to know.Where XRP stands in a rapidly changing regulatory landscapeOn the one hand, XRP's performance is impressive in the light of a nagging lawsuit by the Securities and Exchange Commission (SEC), which sued Ripple in late 2020. The SEC alleged that XRP is a security and that Ripple's sale of the token was an unregistered securities offering. Ripple sold it to financial institutions and individual investors via cryptocurrency exchanges.In July 2023, the judge in the case essentially ruled that XRP was a security when sold to institutions but not when sold to individuals on exchanges. The SEC appealed the ruling, which was seen as a partial win for Ripple, and that is where things stand now.However, new government leadership, such as the Treasury secretary and head of the SEC, are supportive of cryptocurrencies. President Donald Trump has also backed that up with a recent executive order to establish strategic digital asset reserves, one dedicated to Bitcoin and another for other cryptocurrencies. And regulators have begun closing out litigation against some businesses that deal in cryptocurrencies, including cases against Robinhood (HOOD -1.23%), Coinbase (COIN -0.67%), Uniswap, and Gemini. Although Ripple's case still stands, it's encouraging that regulators are easing their stance against the industry.This will ultimately drive XRP's valueIf the lawsuit against Ripple is closed out and investors can finally appreciate XRP's potential in full, the extent of that potential will boil down to the demand for XRP from real-world use.

XRP's purpose is to help facilitate cross-border transactions and money transfers. The world's banking system currently depends on the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to transfer, verify, and settle funds sent between countries, but it's cumbersome, slow, and costly.

Using the Ripple blockchain, funds can be converted from one currency to XRP, then from XRP to another currency at the other end of the transaction in just seconds. This process is also more efficient and cost-effective than SWIFT.

Currently, some institutions use XRP for transactions, while some use Ripple's blockchain but not the XRP token itself. That usage could increase once there's more certainty regarding Ripple's regulatory standing. Meanwhile, its blockchain is receiving technology upgrades that could further strengthen the case for using XRP.Can XRP make you a millionaire?Given XRP's current $122 billion market cap, it seems unlikely that the cryptocurrency will make investors rich overnight. Not to mention, that would put its valuation in the same league as the world's largest companies.

It would take an incredible surge in demand for XRP to propel its market value to the trillions of dollars, which is the level needed to generate the sort of 1,000%-plus total return needed for a six-figure investment to become a seven-figure one.

However, I do think there is still quite a bit of upside potential in XRP at these prices if it manages to establish itself as a key contributor in an increasingly digital economy during the coming years.

Investors should keep an eye on any developments in Ripple's lawsuit for signs that the case could soon be closed out. After that, it is up to financial institutions to decide whether they will use more of XRP for international payments. If this plays out, XRP could be a winning investment.

That said, it could be a wild ride. There are many moving parts -- in government, across the cryptocurrency space, and within Ripple's lawsuit. Not to mention, cryptocurrency prices have historically gone through boom-and-bust cycles.

If you invest in XRP, consider mitigating the risks by diversifying your portfolio, buying it slowly and steadily, and anticipating price volatility in both directions.