Much like the rest of the market, XRP (CRYPTO: XRP) took a tumble during the past three months, falling as much as 24%. Now, with fears of a new cryptocurrency bear market whirling amid global economic uncertainty, the odds of it taking another slide are looking even higher.
Would such a dip be a smart opportunity to buy, or a trap?
To settle the question of whether XRP is worth buying in a bear market, it’s necessary to think about a couple of scenarios.
One scenario is that the bear market’s onset is prompted by events that are happening right now, like economic disruption associated with the Trump administration’s tariffs. XRP would hardly be the only coin suffering. But it would be uniquely exposed to downside because it’s a coin intended for use as a medium of exchange for international money transfers, like those involved in trade.
For it to be worth buying, there needs to be an increasing amount of payments being processed on its platform over time, among other factors. If tariffs lead to lower trade volumes, and they almost certainly will, that’s a lower incentive for financial institutions processing trade payments to use the chain. Likewise, existing financial institutions using XRP would not need to buy and hold as much of the coin because they would be handling a smaller volume of payments overall. So there would be real headwinds to the coin’s adoption among its target users, and probably a significant amount of downside pressure on its price as a result.
Nonetheless, assuming barriers to trade were eventually repealed or lessened, investors could look forward to relief, even in a bear market. And even if tariffs stayed in place for a long time, there would still be some incentive for new customers to start using XRP because it would help them to offset their newly increased costs. So the core investment thesis for the coin would hold, albeit with the coin in a much less favorable environment .
Another scenario could be a bear market prompted by market, monetary, or financial factors rather than by trade-related economic factors. For instance, if the Federal Reserve hikes interest rates, it’s typically bad news for cryptocurrencies and other risk assets like XRP because it becomes more expensive for institutional investors to borrow money and bet it on speculative plays. In this scenario, XRP might sell off, and then the probability of it rebounding would decrease for quite some time.
Once again, that wouldn’t detract from the investment thesis for buying the coin. Price movements have nothing to do with its long-term value. But that’s little consolation to holders when times are tough.
