Should You Buy XRP While It's Under $1?

If you're thinking about investing in XRP (CRYPTO: XRP), there's significant cause for concern. XRP is still trading under $1, despite its epic four-year court battle with the SEC coming to an end in August. The big bounce that many investors expected has never materialized, and XRP remains one of only a handful of top cryptocurrencies that is down for the year.

The good news is that there is a brand-new catalyst for XRP that could have a potentially huge effect on its long-term price trajectory. As a result, it might not be time to give up on XRP quite yet. Let's take a closer look.

A spot ETF for XRP?

Right now, Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) are the only cryptocurrencies that have spot ETFs. However, that hasn't stopped investors from speculating about which crypto could be next to land an ETF. One of the most likely targets is XRP, given that it ranks seventh among cryptocurrencies in market cap and has a track record dating back more than a decade.

That's why a recent move by Grayscale is so important. In mid-September, the investment firm announced the launch of the new Grayscale XRP Trust. Obviously, a trust is not the same thing as an ETF, but it's arguably as close as you're going to get with smaller crypto assets at this point. There are drawbacks, to be sure. For example, the XRP trust will only be open to accredited investors, and will trade over the counter. Thus, regular everyday investors will not have access to it.

But here's the thing: Grayscale has used a similar approach to launch spot ETFs for both Bitcoin and Ethereum. So the thinking is that the Grayscale XRP Trust could be the prelude to an eventual ETF launch for XRP. Just as with Grayscale's Bitcoin trust, a conversion process will be required. But with a bit of financial alchemy, it's possible to transform a trust into an ETF.

Image source: Getty Images.

Thus, it's not entirely out of the question that we could be seeing the launch of a spot ETF for XRP sometime in 2025. On news of the launch of the XRP trust, the price of XRP jumped by nearly 9%. Granted, XRP is still trading for only $0.60, so we're not talking about it skyrocketing in value quite yet. But there is growing buzz that the price of XRP could hit $10 if a new ETF product comes to market.

How realistic is the ETF scenario?

The only problem, of course, is that a new ETF will require the approval of the SEC. Right now, Ripple Labs (the company behind the XRP token) is not out of the woods when it comes to its battle with the SEC. It now appears increasingly likely that the SEC will appeal the case that theoretically came to an end in August. If that happens, all bets are off the table.

In many ways, the XRP case has become a test case for crypto. It's based on a very fundamental question: Is XRP a crypto or a security? Thus, what happens with XRP has the potential to affect every other crypto going forward. That's why the stakes are so high, and why the case has dragged on for nearly four years.

In August, the SEC won a partial victory, with the court deciding that XRP is a security when sold to institutional investors. As a result, Ripple Labs will need to pay $125 million in penalties. But the court also decided that XRP is not a security when sold to retail investors. So, if it decides to appeal the case, the SEC could be looking for a way to achieve total victory over XRP, rather than just a partial victory.

Take the long view with XRP

The future of XRP is very much entwined with the future of crypto regulation in the United States. That's why XRP investors need to keep a careful eye on what's happening in Washington, D.C. Any time there's talk about replacing Gary Gensler, the current head of the SEC, with a more pro-crypto regulator, that's probably good news for XRP. For example, the latest speculation is that billionaire Mark Cuban, known for his pro-crypto views, could become the next head of the SEC.

With so many questions and concerns swirling around XRP right now, it's hard to be bullish over the short and medium term. However, if you take the long view, and are optimistic that a new pro-crypto regulatory regime is coming soon in Washington, then a relatively small investment in XRP today could pay off big tomorrow.

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Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.