XRP enthusiasts are in a frenzy after prominent community figure Chad Steingraber proposed a scenario in which an XRP exchange-traded fund (ETF) could trade at a staggering 100x premium.
Steingraber, an experienced game designer, laid out his thoughts in a recent post, sparking discussions about the potential trajectory of an XRP ETF, especially in light of the continued push for institutional adoption of the altcoin.
Targeting an XRP ETF Share Price of $500
Steingraber’s speculation revolves around the price at which shares of an XRP ETF could trade. His hypothesis depends on crypto reaching an unprecedented price of $5 per coin. In this scenario, he theorizes that the corresponding ETF could reach similarly unprecedented heights, potentially reaching a solid $500 per share.
The actual price of the underlying asset does NOT need to skyrocket. The fund can trade at MASSIVE premiums.
let’s say #XRP Break the ATH @ $5, your ETF fund could literally trade at a 100x premium if institutional demand kicks in.
Yes, that’s right, $500 #XRP Institution Award. 👍 https://t.co/bwN6cGmmZd pic.twitter.com/tHyy4fkbeK
-Chad Steingraber (@ChadSteingraber) March 27, 2024
This high premium, according to Steingraber, would be fueled by an increase in institutional interest in the ETF. He cites the Grayscale Litecoin Trust (LTCN) as a prime example.
Similar to the proposed XRP ETF, LTCN trades at a significant premium to Litecoin’s current market price. Despite Litecoin hovering around $95, investors in LTCN are currently paying a premium of over $250 per Litecoin equivalent within the trust.
Could arbitration opportunities arise?
The prospect of such a high premium sparked discussions about potential arbitrage opportunities. User X Zack, in response to Steingraber’s post, questioned whether individuals holding XRP could exploit this price disparity. Steingraber acknowledged the possibility, especially if the issuing ETF allows in-kind deposits, where investors can directly exchange their token for ETF shares.
XRP market cap currently at $34 billion. Chart: TradingView.com
However, he warned that cash deposits are still a rarity in the ETF market. Although Steingraber expressed optimism about the future adoption of this practice, his absence represents an obstacle to immediate arbitration opportunities.
The XRP community has long advocated for asset managers, especially industry giant BlackRock, to launch an XRP ETF. They believe that such a product would be significantly reinforce the value of XRP increasing its accessibility to institutional investors.
XRP up in the last seven days. Source: Coingecko
A speculative outlook with underlying uncertainties
It is crucial to remember that Steingraber’s view is entirely speculative. To date, no asset manager has taken concrete steps to apply for a XRP ETF. Furthermore, the justification for such a high premium relies heavily on the assumption of substantial institutional demand, a factor that remains uncertain.
The applicability of the Grayscale Litecoin Trust comparison also requires further examination. The specific structure and characteristics of an XRP ETF would significantly influence the emergence of similar premium dynamics.
A reality check for investors
While Steingraber’s prediction has certainly captured the community’s imagination, investors are advised to approach it with a good deal of caution. The approval timeline for an XRP ETF depends on the US Securities and Exchange Commission’s stance on cryptocurrency ETFs.
Additionally, competition from other potential ETFs could play a role in determining the premium, if any.
Featured image from Freepik, chart from TradingView
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