XRP and the blockchain it runs on, the XRP Ledger, are billed as a better way to send money across borders. While the traditional process can take days to complete, XRP international transactions can be settled in seconds.
Investing in XRP could appeal both to financial institutions that make cross-border payments, as well as to individuals. In addition to fast digital payments, some people invest in XRP because they hope its value will go up over time as the token and the technology behind it become more popular.
Like any crypto, XRP is a higher-risk investment. Since it was created in 2012, it has experienced volatility that makes its future value hard to predict.
Here are some details about buying XRP to help you decide whether that’s the right next step for you.
How to buy XRP
1. Decide whether to invest in XRP
The value of any cryptocurrency can change quickly, and that’s been the story with XRP, as well. If you decide to move forward with an XRP purchase, it’s good to consider its likelihood of long-term growth. Right now, the token is among the biggest cryptocurrencies by market capitalization.
But XRP’s future is made uncertain, in part, by an ongoing U.S. Securities and Exchange Commission lawsuit filed in December 2020. The SEC alleges XRP is an unregistered security that was offered to retail investors by Ripple, a crypto payments company whose founders created XRP and its blockchain.
Ripple initially owned 80 billion XRP, a gift from the cryptocurrency’s creators meant to be used to develop the company. Ripple has sold nearly half of those tokens over the past decade. The SEC complaint alleges that the company’s sale of XRP violated federal securities law.
Ripple has denied the allegations, saying XRP is a virtual currency, not a security, which means it doesn’t fall under the same rules requiring registration.
The lawsuit had immediate effects on the coin’s price, as well as its availability; Coinbase suspended trading of XRP on its crypto exchange in light of the allegations. Without knowing the outcome of the case, the coin’s future is in limbo.
2. Find a place to buy XRP
XRP is traded worldwide, so there are various options if you want to buy it. Centralized exchanges are a common destination for crypto buyers. They’re easier to navigate than decentralized exchanges but can be at higher risk of hacking since they’re managed by a central entity.
Decentralized exchanges, including peer-to-peer transactions, can be cheaper but more difficult to navigate for new buyers since they require more technical experience. They’re less likely to be hacked, though, since there’s no single entity to attack.
3. Decide how to pay for XRP
Typically, you can buy cryptocurrencies with cash or crypto.
Cash: Most exchanges accept fiat currencies like U.S. dollars. Platforms differ in how they operate, including what currencies they support, so it’s good to look closely at the one you decide to use. Some require a minimum deposit, support a limited set of fiat currencies, or charge a conversion fee on deposited cash.
Platforms also differ in how you can add cash to your account, but some common methods are Automated Clear House, or ACH, transactions from banks, wire transfers and debit cards.
You may see an option to buy crypto with a credit card. But using high-interest debt this way can be especially risky. If your crypto investments lose value and you can’t pay back your principal, you could be saddled with expensive interest payments.
Cryptocurrency: If you already own cryptocurrency, you could trade some of your existing assets for XRP. Such a maneuver would be an option if you want to own multiple cryptocurrencies without investing more cash.
However, some exchanges don’t accept all cryptocurrencies — and some cryptocurrencies can’t be traded with one another — so be aware of those limitations as you prepare to buy. Additionally, exchanges charge different fees depending on what you’re buying and how.
4. Purchase and store your XRP
After investing in a cryptocurrency like XRP, the last thing you want is to lose your tokens. Deciding where to store your crypto is a vital step in the process.
Using an exchange: This can be a straightforward and simple way to store your cryptocurrency because it outsources management to a third party. However, exchanges also can be a risky option, since they’re susceptible to hacking or technical failures that could cost you your assets. Some exchanges have safety measures in place or offer private insurance to users.
Using your own wallet: Storing crypto yourself can be a way to prevent losing your assets to hackers or other unfortunate events outside your control. But it requires you to keep careful track of private keys — long strings of letters and numbers, like a password — that prove your ownership of cryptocurrencies. If you lose track of those, or someone else gets ahold of them, your assets can’t be recovered.
When deciding on a wallet for your cryptocurrency, it’s important to check that it will work with the XRP network, as well as the exchange you plan to use. Once you’ve confirmed they’re compatible, you have a choice of two kinds of wallets.
Hot wallets: These are digital wallets, including web-based, mobile and desktop options. Because they’re connected in some form to the internet, they’re easy to use. However, that same feature can make them vulnerable to hacking.
Cold wallets: These are not connected to the internet until you’re initiating a transaction. That can make them less convenient to use but much more secure. Because a cold wallet is a physical piece of hardware, it can’t be accessed by an unauthorized person unless it’s in their possession.