Despite the relative novelty of XRP on the investment mainstream, Zagari notes that this particular blockchain has been used for about a decade at this point. Ripple’s stated goal in launching the coin, he notes, was to offer traditional financial institutions a secure means of transacting with one another and with decentralized finance players.
Over the past decade XRP faced some hurdles to adoption, including a four-year lawsuit against Ripple by the US SEC over alleged securities law violations through the sale of XRP tokens. That lawsuit was recently settled, which has opened up greater interest in the coin.
Zagari argues that the interest in and adoption of XRP reflects a growing need among individuals and institutions to transact quickly across borders. Issues with the SWIFT system have been highlighted in recent years, as have certain drawbacks of institutions that lack IBAN numbers — as any Canadian banking customer might know firsthand. XRP, he says, offers an alternative utility to those systems.
Using XRP to conduct a foreign currency exchange, though, comes with some theoretical risk. Buying an XRP coin to convert it into another currency could technically expose that user to the risk of XRP price fluctuating before it’s converted into the other fiat currency. Zagari notes, however, that this risk is purely a product of time lag. Blockchain transactions, he notes, are processed within one and three seconds. That speed, he says, should make the risk of price fluctuation much more manageable.
But if the token is used to facilitate exchanges, rather than store value, how could investors in a new ETF expect to see its overall price driven higher? Zagari argues that the investment growth prospects for XRP come down to network effects. The more frequently the token is used and the more deep its network becomes, the higher the price of the token should go. Zagari makes a point of separating XRP from Bitcoin, noting that Bitcoin’s rise is a product of its inherent scarcity. For a technically limitless cryptocurrency like XRP, much like Solana or Ether, network effects are necessary to drive price appreciation. Zagari sees potential utility in XRP for people who don’t have bank accounts but do have access to smartphones or the internet as a medium of transaction that works both with and around traditional financial institutions. As more of those users employ XRP to create a means of digital payment, the higher its value should go — in Zagari’s view.