Bitcoin saw a sharp price decline for much of the past week. The cryptocurrency fell by almost 10% from January 7th to January 14th. Bitcoin’s decline was reflected in altcoins across the crypto space Ethereum, SolanaAnd Dogecoin All lose as much or more than the oldest and most valuable coin.

The decline was due in part to a hotter-than-expected jobs report released Friday. This means the Federal Reserve could delay or reduce further rate cuts. Digital assets tend to be viewed by investors as “risk-on” – that is, investments that increase the risk of a portfolio. In general, investors are more willing to take risks when interest rates are falling, while the opposite is true when interest rates are rising. With fewer cuts now expected, risky investments like cryptocurrencies have been affected.

But despite the movement of the rest of the market XRP (XRP 8.19%) has increased by 3.7% since January 7th. Let’s take a look at why that is, and then consider whether XRP could be a millionaire.

An important deadline is approaching

In 2020, XRP’s parent company, Ripple, was sued by the Securities and Exchange Commission (SEC). The regulator claimed that the company sold XRP as an unregistered security, which is quite taboo. In August 2024, a court ruled overwhelmingly in Ripple’s favor, approving a $125 million fine, while the SEC originally sought $2 billion.

But how is this relevant now? The SEC appealed the ruling in October but has yet to submit its evidence if an appeal is to be lodged. The deadline for this expires today. Under normal circumstances, there would be little reason to believe that the SEC would not meet this deadline. However, the regulator is experiencing a crucial leadership change due to the election of Donald Trump.

The current chairman, Gary Gensler, is stepping down. Gensler wasn’t exactly a fan of XRP and cryptocurrencies in general, but Trump’s choice for his successor, Pail Atkins, will likely take a different path. Investors appear to believe that the SEC will no longer pursue its appeal in anticipation of this leadership change and overall philosophy.

XRP has a valuation problem

While there could certainly be a short-term gain in the SEC not pursuing its appeal to date, I question the long-term value of XRP. That’s because the value the market currently places on the token doesn’t seem to match what it can realistically offer in the real world.

XRP is set to transform banking by dramatically reducing costs and increasing the speed of transactions between financial institutions. In 2023, legacy systems will cost the industry $193 billion in fees. This is the number that proponents cite to illustrate how big the opportunity is for XRP. And while the number is impressive, it is completely misleading.

XRP transactions are extremely cheap by nature. They are orders of magnitude cheaper than the legacy transactions they seek to replace. If this is true, even if XRP captures 100% of the market, the fees collected would be several orders of magnitude less than the $193 billion currently paid out to legacy systems. With this in mind, XRP’s current market cap of $150 billion does not seem realistic.

The question at hand

Okay, let’s assume I’m wrong. Let’s assume that XRP can continue to grow significantly. Can it achieve millionaire status? For our purposes, let’s assume that a $10,000 investment would need to become $1 million in 30 years. However, $1 million in 30 years is only worth about $300,000 today. By today’s standards, a real millionaire would have to turn our $10,000 into $3.3 million – a tall order.

That represents a return of 33,000% over 30 years, which is an annual rate of 21.3%, more than double the historical stock market average. If XRP grew at this rate, it would have a market cap of $48 trillion by 2065, as much as the ten largest banks combined (assuming a generous annual growth rate of 10%). Do you think XRP could be worth the combined market cap of the 10 largest banks in the world?

With that in mind, I wouldn’t call XRP a millionaire. Additionally, given its current valuation, I wouldn’t recommend it as an investment at all – not at this price. If you are interested in investing in cryptocurrencies, Bitcoin is the smarter choice.