Is xrp-revisits-key-50week-sma-zone-linked-to-past-850-rally">Ripple’s XRP Undervalued? Market Cap and Utility Token Potential Examined

XRP serves as a high-speed cross-border payment token through Ripple’s On-Demand Liquidity (ODL) service and is expanding its utility via smart contract capabilities on the XRP Ledger. Despite these developments and a market capitalization near $30 billion, XRP’s valuation remains substantially below Bitcoin and Ethereum, raising questions about its current market position and future potential.

What happened

XRP has long been positioned as a digital asset facilitating fast and cost-efficient cross-border payments. Ripple’s On-Demand Liquidity (ODL) service leverages XRP to provide liquidity for international money transfers, enabling transactions at speeds and costs superior to traditional systems. Ripple claims over 300 customers globally use its RippleNet platform, including notable financial institutions such as Santander and SBI Holdings, underpinning XRP’s practical utility in the payments sector.

More recently, Ripple has advanced the XRP Ledger’s functionality beyond payments. The network introduced the Hooks amendment, which allows for lightweight smart contract-like features, and is preparing to integrate the Ethereum Virtual Machine (EVM). This integration aims to enable compatibility with Ethereum-based decentralized applications (dApps) and decentralized finance (DeFi) projects, potentially broadening XRP’s use cases.

As of early 2024, XRP’s market capitalization stands at approximately $30 billion, significantly lower than Bitcoin’s roughly $500 billion and Ethereum’s near $200 billion market caps. XRP’s transaction throughput is around 1,500 transactions per second (TPS), substantially faster than Bitcoin’s approximate 7 TPS and Ethereum’s 15-30 TPS before sharding upgrades, reinforcing its positioning as a high-speed payment solution.

Analysts and opinion pieces, such as one from Cryptopotato, interpret XRP’s dual functionality—as both a payment token and emerging smart contract platform—as a unique market position that could allow it to capture share from both Bitcoin and Ethereum’s domains. The anticipated EVM compatibility may attract DeFi developers, potentially increasing network usage and demand for XRP tokens. Additionally, XRP’s faster transaction speeds and lower fees relative to Ethereum’s current mainnet are seen as competitive advantages for certain decentralized applications.

However, XRP’s market capitalization remains far below its major competitors. The ongoing lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against Ripple Labs introduces regulatory uncertainty, which, along with entrenched network effects and market perception, continues to weigh on XRP’s valuation.

Why this matters

The evolution of XRP’s utility highlights important structural dynamics within the cryptocurrency ecosystem. By combining high-throughput cross-border payments with expanding smart contract functionality, XRP challenges the more siloed roles of Bitcoin as a store of value and Ethereum as a dominant smart contract platform. This dual utility could position XRP to address diverse market needs, potentially accelerating adoption and increasing token demand.

Moreover, the integration of EVM compatibility on the XRP Ledger signals a strategic effort to bridge XRP’s infrastructure with the broader Ethereum ecosystem, which dominates DeFi and dApp development. If successful, this could diversify XRP’s use cases and foster developer engagement, which are critical factors for network growth and market capitalization expansion.

Ripple’s existing partnerships with financial institutions and its RippleNet customer base underscore XRP’s practical relevance in the payments sector, a use case that remains a key differentiator from many other cryptocurrencies. The high transaction throughput and low fees further enhance XRP’s appeal for applications requiring speed and cost-efficiency.

Nonetheless, regulatory uncertainty stemming from the SEC lawsuit and the competitive pressures from emerging cross-border payment solutions and Ethereum Layer 2 scaling methods continue to influence XRP’s market position. These factors underscore the complexity of assessing XRP’s valuation purely on technological or utility grounds.

What remains unclear

Several critical questions remain unanswered by the available information. First, the impact of the ongoing SEC litigation on institutional adoption and investor confidence in XRP is uncertain, with no clear resolution timeline or outcome publicly available. This regulatory ambiguity complicates assessments of XRP’s future market potential.

Second, there is limited data on the current and projected developer adoption of XRP Ledger smart contracts compared to Ethereum and other smart contract platforms. Comprehensive metrics on developer activity, decentralized application deployment, and ecosystem growth are not publicly accessible, making it difficult to quantify XRP’s traction in the smart contract space.

Third, the extent to which EVM compatibility will translate into meaningful DeFi ecosystem growth on the XRP Ledger remains unclear. Without longitudinal usage data, it is not possible to determine whether this technical integration will result in significant network effects comparable to Ethereum or its Layer 2 solutions.

Fourth, the competitive landscape for cross-border payment solutions is evolving, with new entrants and scaling technologies potentially challenging XRP’s market share. How these dynamics will affect XRP’s positioning is not yet determinable.

Lastly, market capitalization comparisons between XRP, Bitcoin, and Ethereum do not account for differences in circulating supply, token unlock schedules, or tokenomics nuances. This limits the direct comparability of valuations and complicates conclusions about undervaluation.

What to watch next

The resolution of Ripple’s SEC lawsuit, including any regulatory clarifications or rulings that could influence institutional adoption and investor sentiment.
Public disclosures or third-party reports providing detailed metrics on developer activity, smart contract deployments, and decentralized application usage on the XRP Ledger.
Data on the actual deployment and ecosystem growth following the integration of Ethereum Virtual Machine compatibility on the XRP Ledger.
Transaction volume and liquidity metrics within RippleNet, especially the proportion denominated in XRP versus fiat or other assets, to better understand XRP’s role in cross-border payments.
Competitive developments in cross-border payment technologies and Ethereum Layer 2 scaling solutions that could impact XRP’s market positioning.

XRP’s evolving utility as both a high-speed payment token and an emerging smart contract platform presents a distinctive position within the cryptocurrency ecosystem. However, significant uncertainties remain around regulatory outcomes, ecosystem adoption, and competitive dynamics. These unresolved factors currently limit the ability to definitively assess whether XRP is undervalued relative to its peers or poised for substantial market cap growth.

Source: https://cryptopotato.com/is-ripple-xrps-price-undervalued-two-reasons-to-consider-opinion/. This article is based on verified research material available at the time of writing. Where information is limited or unavailable, this is stated explicitly.