With a market capitalization of up to $177 billion, XRP is currently the third-largest cryptocurrency in the world, just behind Bitcoin and Ethereum. However, behind this impressive growth are a series of complex issues that not every investor is aware of. Here are 3 key factors you should carefully consider before deciding to invest in XRP.

1. Ripple Is Not XRP

One of the most common misconceptions among new investors is the interchangeable use of the names Ripple and XRP. In reality, these are two distinct entities but closely related:

  • Ripple Labs is a fintech company based in San Francisco, specializing in developing cross-border payment solutions.

  • XRP is the cryptocurrency created by Ripple in 2012 for use in its payment network.

  • Ripple is also often used to refer to the RippleNet payment network, while XRP is the primary currency in the XRP Ledger blockchain.

This distinction has led to a historic legal battle with the SEC (U.S. Securities and Exchange Commission). The SEC argues that XRP is an unregistered security, leading to Ripple being sued in December 2020. The lawsuit has lasted for years and is still in the final processing stage. This case is a clear testament to the legal risks that XRP faces.

2. XRP – “The Bank's Currency”

XRP is referred to as a "bridge currency." Its main function is to facilitate quick conversions between fiat currencies through the blockchain network. Thus, XRP was originally designed to serve cross-border money transfers.

Currently, XRP is primarily used for large-value transactions between banks and financial institutions. Its superior speed and low costs make XRP an attractive option in the field of international payments. This is why XRP is often referred to as "the currency of the banking world."

However, to expand its application and attract banks, Ripple does not solely rely on XRP. For example, last year, the company launched a new stablecoin called Ripple USD to increase the demand for XRP.

It's worth noting that stablecoins can be a double-edged sword. They provide more stability and convenience than XRP, especially in cross-border transactions. Therefore, if stablecoins become a more popular choice, they could overshadow XRP's bridging role, significantly impacting the potential growth of this currency in the future.

3. Tokenomics – The Ownership Story of XRP

In the world of cryptocurrency, tokenomics refers to the mechanisms of issuance, distribution, burning, and management of the total token supply. This is a very important factor for XRP, as there has long been controversy over who actually owns XRP.

According to the latest data:

  • The top 10 largest wallets hold up to 41% of the circulating XRP supply.

  • The top 20 wallets control 50% of the total XRP supply.

This is equivalent to 20 investors holding half of the Bitcoin supply, which easily raises concerns in the market about XRP price manipulation.

Although the true identities of these wallets are difficult to determine, many believe that these are the founding members of Ripple or early venture capital investors. This raises concerns due to the possibility of a large-scale sell-off at any time.

A prime example is last July when XRP was peaking near $4, a co-founder of Ripple sold $175 million worth of XRP, causing the price to plummet to $3. This action led investors to question the future of XRP – why would insiders sell when the market was euphoric?

✅ Advice Before Investing in XRP

The three factors above suggest that XRP is not as simple an investment as many think. While XRP has many strengths:

  • Has existed for over a decade

  • Has strong support from financial institutions

  • Ranked in the top 3 by market capitalization

...but also comes with legal risks, competition from stablecoins, and issues of centralized ownership.

Therefore, if you are considering investing in XRP, take the time to thoroughly research and understand the potential risks. If in the future XRP does not achieve the expected gains, you will also understand why.

Conclusion: XRP remains a cryptocurrency with great potential, but also full of challenges. Caution and understanding are key factors that help investors go far with XRP in the volatile journey of the crypto market.