New assets are trading on this chain, and it’s a good sign.
Commodities and cryptocurrencies usually have nothing to do with each other. But XRP (XRP +0.74%) is in the process of changing that by tokenizing commodities and putting them on the XRP Ledger (XRPL).
If the XRP Ledger becomes a meaningful venue for tokenized commodity activity — which some of the most recent data suggests is happening right now — the coin could plausibly trade back above $2. Here’s what’s going on and why it’s bullish.
Image source: Getty Images.
This network is winning a key segment
Real-world asset (RWA) tokenization is the process of recording ownership of an asset, such as a commodity or futures contract, on a blockchain like the XRPL.
For commodities, the token usually represents a claim to a physical asset that’s warehoused and legally controlled elsewhere. Nonetheless, when a blockchain is used to manage tokenized commodities, their value appears as capital managed by the chain, a sign that it’s being used for real economic activity.
Today’s Change
(0.74%) $0.01
Current Price
$1.48
Key Data Points
Market Cap
$90B
Day’s Range
$1.45 – $1.51
52wk Range
$1.14 – $3.65
Volume
3.5B
Across the crypto sector, there’s about $7 billion in tokenized commodity asset value, up 66% from just 30 days prior to Feb. 11. And $1.1 billion of that sum is recording tokenized value attributed to the XRPL, up 920% from just a month ago.
That makes it one of the sector’s leaders for the tokenized commodities segment, second only to Ethereum.
There’s a lot of upside here
Despite an influx of commodity capital being managed by the XRPL, the coin’s price is down by 33% since Jan. 11 as a result of a broader sell-off in the crypto market. That means the market probably hasn’t yet fully priced in the huge validation of XRP’s network and its capabilities, which the deluge of tokenized commodities is in the process of proving.
If tokenized commodity asset issuers keep choosing the chain as their asset management solution, and perhaps as their asset distribution and trading solution, on-ledger activity will rise, the number of asset holders will balloon, and all that will require players to buy and hold more XRP than they do now. An ongoing influx of real-world asset activity on the network makes sense, as it has a handful of built-in features that help financial institutions maintain their regulatory compliance posture while holding and trading tokenized instruments.
Of course, moving from more tokenized commodities to higher-priced coins isn’t automatic. Transaction costs denominated in XRP are tiny, though all accounts on the network are still forced to retain reserves of the coin, which can’t fall beneath a minimum level. So, if more capital keeps onboarding to the chain, expect the coin’s price to fly in the long run, but probably not as a result of the new activity of the last month, as it’s still fairly preliminary in comparison to the large volume of accounts that would be needed to create meaningful pressure on XRP’s price.
Nonetheless, the coin reaching $2 and beyond is highly likely in the medium term. Just be aware that it’s fairly risky to buy XRP at the moment due to the bearish sentiment in the crypto sector; soon enough, with the sell-off in the rearview mirror, it’ll be time to buy.