Is This Latest Catalyst for XRP a New Reason to Buy It?
XRP (CRYPTO: XRP) is no stranger to catalysts big and small, as its holders know. And it just got another one that could imply good times ahead.
But does this new development materially change its upside for investors, or is it a drop in the bucket? Let's check out what just happened and answer that question.
Will this new fund be a boon?
On April 8, Teucrium Investment Advisors, an asset manager, introduced an exchange-traded fund (ETF) that offers investors leveraged exposure to XRP, a crypto designed to facilitate money transfers.
That fund, the Teucrium 2x Long Daily XRP ETF, should not be confused with the ETFs currently under consideration by the Securities and Exchange Commission (SEC), which are not yet approved, and which offer investors spot exposure that's similar to holding the coin directly in their own wallet.
This new ETF implies several things for XRP's merits as an investment.
First, the new fund is notable because it suggests that there is demand for tools that let investors in traditional financial sectors get exposure to more-speculative and more-volatile formulations of XRP. Teucrium wouldn't be providing the fund otherwise.
More importantly, the fund is a path for investors to still buy the coin even if they aren't willing to engage with the cryptocurrency sector using its native technology. So it could attract new capital that wouldn't otherwise be invested into XRP directly.
Another factor is that there will be some added demand for XRP from Teucrium, assuming its ETF gains traction, because the manager needs to back the fund by holding the coin. That should result in a negligible increase to the coin's price over time. When paired with the future approval of other ETFs from other (and larger) asset managers, the total impact could be moderately positive.
Lastly, the ETF is a vote of confidence that XRP isn't going away. Although XRP wasn't exactly in need of such a vote from an asset manager before, given that it's among the largest of cryptocurrencies, it's another point in favor of the idea that XRP already has social proof and widespread acceptance, which makes it incrementally less risky than before.
There aren't any real downsides to the new ETF hitting the scene, at least not for those who hold XRP directly. So overall, it's a modestly bullish development.
You don't have to go out on a limb here
You don't need to go out and buy shares of this ETF if you already hold XRP. The fact that it's leveraged makes it inherently a bit too risky for most investors, not to mention being a much higher-maintenance asset in comparison to just buying and holding the coin itself. There simply isn't much reason to dabble here.
Furthermore, the new ETF isn't a valid reason to go out and buy more XRP than you're comfortable with holding. Any price increases stemming from the new ETF will take some time to unfold, and you probably won't notice them if the other ETF-related catalysts occur, as those are likely to be much stronger.
The fact that there aren't any new risks being introduced means this is a sweetener, but it doesn't change the fundamental investment thesis for buying XRP, nor does it reduce the coin's volatility or its exposure to other risks.
Therefore, overall, if you don't do anything in response to the new fund, you're not going to be missing out on much. If you're already holding XRP and looking for an excuse to buy some more, there are still probably going to be better reasons coming along fairly soon.
But there's no rule that says you can't take the opportunity today and then buy more later. Just remember that there's not much point in making an additional investment in the coin if you're going to sell it before a minor catalyst like the new ETF can exert its full impact over time.
Should you invest $1,000 in XRP right now?
Before you buy stock in XRP, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and XRP wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $495,226!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $679,900!*
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Globe and Mail
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