- XRP exchange-traded products like spot ETFs would provide investors with exposure without directly owning the cryptocurrency.
- It is similar to Bitcoin and Ethereum products, allowing investors to buy and sell under regulated conditions.
- The benefits of these products include easier access, reduced risk, and wider adoption.
So far, there are ETFs for two cryptocurrencies: Bitcoin and Ethereum.
With the final approval of the Ethereum ETFs, the market is now waiting for more exchange-traded products associated with several other coins. This includes Solana, Cardano, and XRP.
In particular, Solana has a stronger claim to an ETFs “next in line” status.
However, XRP remains a top contender. So, what would an XRP ETF be like?
Everything About an XRP ETF
To begin with, an XRP ETF would be similar to the Bitcoin and Ethereum ETFs. Similarly, it would track the value of Ripple Labs’ cryptocurrency.
This way, investors can buy shares of this ETF instead of directly buying the cryptocurrency. They can even trade them on financial markets. The same way they would stocks or indices.
The primary goal of this product would be to allow investors to gain exposure without directly owning the crypto themselves. They can profit from its price movements, store it away, gift it to others, or even add it to their retirement funds.
How Would an XRP ETF Work?
ETFs need an underlying asset, which in this case is XRP. Furthermore, they would need professional fund managers and trading platforms to help investors easily buy and sell once approved.
But why would an XRP ETF be the best when investors can buy some directly?
To answer this question, it’s important to note that crypto isn’t for everyone. Not everyone finds it easy to buy crypto from an exchange (least of all decentralized ones).
The buying process can be complex and risky for some investors—not to mention the risks of storing it securely. Moreover, buying an XRP ETF is a much easier than buying XRP and worrying about the crypto.
The fund does it all, from buying off exchanges to storing to ensuring that the funds are safe.
An XRP ETF Would Also Boost Price
The crypto market’s issue is that thousands (if not millions) of investors with billions in capital remain sidelined due to its complex nature.
XRP ETFs would create a scenario where investors can easily buy XRP in a regulated environment. This would bring in a massive price increase due to the billions in inflows from these investors.
Moreover, XRP would also enjoy wider adoption, with more active usage, investment, and value.
How is the XRP ETF Price Determined?
We mentioned earlier that an XRP ETF would track the value of the cryptocurrency and allow investors to gain exposure. But how does it do this?
Issuers typically have parties called Authorized Participants (APs), who buy large amounts of XRP when demand for the ETFs increases.
They then deliver these XRP tokens to the issuer, who issues new shares to the APs in return for being bought by the waiting investors.
This way, the supply-demand dynamics remain, with an equal share-to-XRP ratio maintained.
Disclaimer
This article is for informational purposes only and does not provide any financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.
