This 1 New Catalyst Shows Why XRP Will Climb Above $3

XRP's (CRYPTO: XRP) price is currently near $2.14, but, in keeping with the coin's momentum over the last year or so, there's now yet another driver for it to climb to above $3 and beyond.

What's more, there's yet another piece of evidence that it's going to see more use for precisely what its creators intended, and by the exact demographic that's positioned to get the most mileage. Let's break down what's new with XRP and why it's a bullish factor for its price in both the near term and the long term.

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A big regulatory change abroad portends higher prices

As of Feb. 19, institutional investors in Brazil are allowed to hold and trade exchange-traded funds (ETFs) that hold XRP. Now, the investors at those financial institutions will be able to contribute to the volume of traffic on XRP's chain, which as of the afternoon of Feb. 26 was nearly $7 billion over the preceding 24 hours.

This new development supports the idea that the coin will continue its climb despite already rising by 328% in the last 12 months. In Brazil, the approval of the first XRP ETF will likely pave the way for future ETFs, which will create more trading volume, and it's also very likely that eventually retail investors will be allowed to buy the funds as well. More importantly, the issuers of the ETFs will need to buy and hold XRP to offer the financial instrument to their clients.

When issuers buy, sell, or transfer XRP, it'll generate fees. Those fees trickle back to Ripple, the business that maintains the XRP blockchain. Eventually, enough fees accrue to fund upgrades to the network, or to fund business development activity in new markets like Brazil so as to onboard more institutional users.

But the ETF is hardly the first foot in the door that XRP has in the country. Its largest exchange bank is already using the chain, and it recently launched its own stablecoin to facilitate transfers. The stablecoin will also generate fees for XRP even though it isn't the chain's native token, so the fact that a major processor of international money transfers is already onboarded is yet another driver of higher prices in the near future.

Plus, Brazil's move directly affirms the validity of the investment thesis for the coin, namely that financial institutions that need to perform a lot of international money transfers will be incentivized to buy it to avoid currency exchange fees as well as money transfer fees. For investors, that's a clear sign that XRP's chances of rising above $3 are looking better and better.

These new tailwinds could soon come to the U.S.

The tailwind from the ETF approval in Brazil could soon be joined by a much stronger one of the same kind.

In the U.S., the Securities and Exchange Commission (SEC) is currently evaluating whether to approve XRP ETFs right now. Open to all investors, these ETFs could see a massive trading volume increase and significant fee growth if approved. Additionally, as the American financial system is much larger than Brazil's, with many more potential buyers of an ETF, the price impact of a potential approval of the currently outstanding ETF applications is certain to be much larger. Recent moves by regulators suggest that the approval is probably going to happen, eventually.

Approval alone might not be the key to boosting the coin's price above $3, but when paired with other catalysts like the potential integration of XRP into a U.S. national crypto reserve, the chances increase significantly.

That doesn't mean you should buy the coin just to dump it when and if those catalysts occur, however. The smartest way to invest in XRP is to build up a position slowly, intelligently buy dips if they occur, and then hold on to your coins for at least a few years in order to get the benefit of fees accumulating because of the activity on the chain. Using that approach, you won't need to care so much about arbitrary factors like the price on any given day, which will also make it a more comfortable investment to hold.

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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.