Should You Buy XRP While It's Under $4?

If you've been focused on the explosive rise of Bitcoin (CRYPTO: BTC) after the U.S. presidential election, you might have completely missed an even bigger breakout in the crypto market. XRP (CRYPTO: XRP) -- the cryptocurrency formerly known as Ripple -- has surged from a price of $0.52 on Nov. 5 to $2.73 on Dec. 2.

That's the highest level XRP has traded at in nearly seven years. With its latest move, XRP has passed Solana and Tether to become the third most valuable cryptocurrency in the world. So is now the time to buy XRP, or is it already too late?

The regulatory clouds over XRP have lifted

There's a good reason why XRP has absolutely skyrocketed in value after the election of Donald Trump as the next U.S. president. The Trump administration's pro-crypto approach is going to have a huge positive impact on the future of Ripple Labs, the company behind the XRP crypto token.

For several years now, Ripple has been bogged down in an epic lawsuit with the SEC over whether it is a cryptocurrency or a security. With the Trump administration taking over, though, it now looks like that lawsuit is going to disappear. The current head of the SEC, Gary Gensler, announced that he will be stepping down soon. And the growing consensus is that the SEC may no longer be interested in pursuing regulatory action against Ripple.

Even better, the Trump administration will likely establish the Commodity Futures Trading Commission (CFTC) as the new lead regulator for crypto. That's music to the ears of XRP investors. For years, the SEC has been perceived as anti-crypto and anti-XRP. So, if the CFTC replaces the SEC for crypto-related regulatory tasks, that would essentially give XRP a fresh new opportunity to build out its U.S. operations.

A new spot ETF for XRP?

The second big catalyst for XRP is the potential launch of a new spot-price exchange-traded fund (ETF) as soon as next year. On Dec. 2, New York-based investment firm WisdomTree (NYSE: WT) became the next big financial institution to file for a spot XRP ETF with the SEC. That comes on the heels of an ETF filing by 21Shares in November.

Both WisdomTree and 21Shares already have spot Bitcoin ETFs, so their decision to jump into the ETF game with XRP is a positive sign. There's also growing speculation that BlackRock (NYSE: BLK) -- the $10 trillion asset manager behind massive funds like the iShares Bitcoin Trust (NASDAQ: IBIT) -- could be the next big name to file for a spot XRP ETF.

How high can XRP go?

The big question now is: Just how much higher can XRP go? In less than a month, XRP has blown through all the price support levels that technical analysts had set up for it. At its current price of $2.73, XRP is theoretically within striking distance of its all-time high of $3.84, which it reached in January 2018.

That being said, it's difficult to say exactly how much XRP is really worth right now. The bullish case says that all of XRP's regulatory woes are behind it. If a spot ETF is actually approved by the SEC in 2025, then it is quite likely that XRP could claw its way all the way back to the $3.84 level.

Image source: Getty Images.

The super-bullish case for XRP, though, says that a price level above $20 might be possible. That would be more than a 7-fold gain from today's levels. Longtime trader Peter Brandt, for example, recently set a $24 price target for XRP.

There are several factors that might push XRP to these stratospheric levels, including Ripple's planned launch of a new stablecoin in December. If the launch is successful, Wall Street financial institutions are going to have a much easier time putting their money to work within the XRP blockchain ecosystem.

Should you buy XRP?

Based on the above, it's easy to be bullish on the future prospects of XRP. Everything seems to be going its way right now.

My main concern is that XRP may have risen too far, too fast. If you think that Bitcoin is overheating after rallying 40% over the past 30 days, what do you think about XRP? It's up by more than 400% during the same period.

So, if you are thinking about investing in XRP, do your due diligence. It remains a highly speculative, highly volatile investment. If you are a longtime investor in XRP, it's worth holding on to your position to see how much higher it can go. But if you are new to XRP, you might have just missed out on one of the greatest post-election crypto rallies of all time.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and XRP. The Motley Fool recommends WisdomTree. The Motley Fool has a disclosure policy.