XRP is the native cryptocurrency of the Ripple network, which is a payment system for financial transactions. Despite being not as well-known as Bitcoin, it is listed among the top 10 cryptocurrencies by market cap. XRP is a unique digital currency that provides investors with outstanding features such as significantly higher transaction speed, low fees, accessibility, and more.
The crypto industry is constantly evolving and new coins are emerging all the time. Thus, it may be challenging for traders to decide which one could be a good investment for them. In this article, we will provide you with a complete guide to Ripple (XRP) cryptocurrency, its core features, benefits, potential risks, and more details that will help you analyze if this financial asset could fit your trading portfolio.
The article covers the following subjects:
History of Ripple (XRP)
Ripple is a company that specializes in money transfers, currency exchange, and remittance systems. The first ideas about it were born even before the introduction of Bitcoin. In 2004, Ryan Fugger launched the first version of the company, called RipplePay. In 2011, another software engineer, Jed McCaleb, was working on the development of the blockchain and XRP. He suggested Ryan Fugger give him control over RipplePay. This way, in 2012, they started a new company that used XRP as its running cryptocurrency. Its first name was NewCoin, then they changed it into OpenCoin, and, finally, it got its modern name: Ripple.
When it comes to the history of XRP, in 2012, its developers mined 100 billion of these coins, which is the maximum available amount of this currency, meaning that no more XRP tokens can be created. As for the XRP price, it has seen significant movements in value throughout its history. In 2017, XRP experienced the most intense bullish rally, which caused its value to increase from around $0.0061 (in 2016) to $1.97, showing a growth of 32,943%. In 2018, the XRP price continued going up, which led to its all-time record high of $3.28. In the next two years, this asset saw an extreme drop in value. In 2019, it was traded at around $0.30, and in 2020 it grew to $0.70. In 2021, XRP experienced another significant uptrend. However, some legal actions between Ripple and the SEC are still causing a lot of uncertainty about potential movements in the value of XRP. As of December 30, 2022, XRP cryptocurrency traded around $0.33.
Factors Affecting XRP’s Price
XRP, just like any other cryptocurrency, is known to be a highly volatile investment. It’s complicated to foresee where its price is heading. Thus, to increase the efficiency of their XRP trading strategies, investors need to be aware of and keep an eye on the factors that may impact the value of this digital asset. Apart from factors that influence the price of almost any financial asset, such as supply and demand, competition, news, market sentiment, and others, there are some particular aspects to consider. Here are some of them:
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Other crypto markets. Some experts say that the XRP price shows a correlation to other cryptocurrency markets, especially the biggest ones. As Bitcoin remains the most popular digital currency, taking first place by market capitalization, significant changes in its price are likely to influence the sentiment about other cryptocurrencies, including XRP.
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Ripple technology. Ripple is a company, whose main goal is to make international money transfers fast and cost-efficient. Before the introduction of RippleNet, SWIFT was the only system for international transactions. Nowadays, due to the growing popularity and adoption of Ripple technology, XRP has all chances to increase in value.
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“Whale” XRP players. Whales are investors who hold a large amount of XRP and try to gain increased profits from the high volatility of this asset. This way, their trading actions could impact the overall market sentiment and cause the XRP price to go in either direction.
How Is Ripple (XRP) Different From Other Cryptocurrencies?
Ripple (XRP) stands out among other digital assets, including Bitcoin and popular altcoins such as Ethereum (ETH), Litecoin (LTC), and others. Let’s explore the features that make it unique.
XRP Doesn’t Use a Blockchain
XRP doesn’t utilize a traditional blockchain. It is built on the XRP Ledger, which is a public decentralized blockchain driven by a community of programmers. The core benefits of this system include but are not limited to:
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significantly higher transaction speed (up to 1500 transactions/sec);
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open-source, meaning that it’s available for everyone;
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sustainability (it doesn’t require high energy consumption like Bitcoin and Ethereum);
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cost-efficiency.
XRP Is Centralized
Ripple (XRP) is often considered centralized. However, it’s important to understand that Ripple runs on XRP Ledger technology, which is said to be decentralized. However, it differs from perfect examples of decentralized currencies like Bitcoin and Ethereum, which are based on the proof-of-work mechanism. XRP, in contrast, uses a consensus protocol and involves validators, whose main responsibility is to record and validate transactions without being paid. They are the main reason why XRP is called centralized.
You Can’t Mine XRP
In 2012, when XRP was first introduced to the public, it was pre-mined by its developers and limited to 100 billion coins. That means that no one can mine this asset anymore. Nowadays, there is around $45.4 billion XRP in circulation, while the rest have yet to be released by the Ripple company.
Why Should I Invest in Ripple?
XRP is one of the largest cryptocurrencies, and draws the interest of many traders. Let’s consider the main benefits that make it such an appealing investment.
XRP Is Affordable
The low XRP price allows more traders to gain exposure to the cryptocurrency market, even ones who are extremely limited in their capital. Taking the price of XRP at around $0.30, with $100 it’s possible to invest in 333 XRP. This also means that with a considerably low risk of loss, traders can benefit from potentially high profits.
Market Cap of Ripple
Ripple (XRP) is one of the largest cryptocurrencies by market capitalization, worth around $17.5 billion. It takes the 6th position in the rating following the Binance Coin (BNB). This indicates that traders feel confident in this digital asset, and thus foster the stability of its market.
Fast and Cost-Efficient Transactions
Ripple was inspired by Bitcoin, but one of its main goals was to make the process of international money operations more convenient, cost- and time-effective. Nowadays, XRP boasts a transaction cost of less than $0.01 and an impressive processing speed of about 1500 operations per second, which is more than 1000 times faster than Bitcoin. This is the reason why Ripple is gaining growing popularity among big financial institutions and banks.
Adoption
Being a unique technology that allows for fast, secure, and low-cost transactions, Ripple has been gaining growing support from big financial institutions and banks. It’s probably one of the most-liked cryptocurrencies, and in some cases could beat even Bitcoin. The Ripple (XRP) partners include MoneyGram, American Express, among others.
Moving into CBDCs
Ripple offers its own Central Bank Digital Currency (CBDC) platform. It’s an innovative solution that is said to ensure highly secure and fast transactions for different market players including huge financial institutions and individual members of the public.
What Are the Potential Risks of Investing in Ripple?
Ripple (XRP), just like any digital asset, comes with quite a high risk of losses. Thus, if you are considering this cryptocurrency as your potential investment, it’s important to be aware of not only its benefits but also its pitfalls. Let’s take a look at some of them.
It Is Less Decentralized
Decentralization is a core principle for cryptocurrencies. However, XRP is not a usual crypto asset, since it doesn’t run on a traditional blockchain. Unlike Bitcoin or Ethereum, which use a proof-of-work mechanism, Ripple operates on a peer-to-peer consensus protocol. It involves a default list of transaction validators, which raises questions about the decentralized nature of the network.
There Won’t Be Any New Ripple
Scarcity and an unlimited amount of coins play an important role in any crypto asset’s price formation. Bitcoin, for example, has a finite supply, which can lead to an increased demand for BTC in the future and a potential rise in its value. Ethereum, in contrast, doesn’t have an issuance limit. This means that after a while, its production is likely to slow down. XRP is a completely different story. It was pre-mined in the amount of 100 billion coins. Some XRP tokens are already in circulation, however, there is a risk that a huge amount of the pre-mined coins could be introduced at a not very appropriate time and dramatically impact the price.
Ripple And XRP Are Not the Same Things
Ripple and XRP can’t always be interchanged. Apart from the name of the coin, Ripple is also the name of the entire company, which offers various services. Many traders mistakenly think that the growing number of Ripple partners has a direct influence on the growing adoption of XRP. However, the majority of them are mostly interested in Ripple blockchain technology rather than in its crypto.
A Big Share of XRP Belongs to Ripple
Ripple owns a significant amount of the XRP in circulation and stores the rest of the pre-mined coins for regular release. Although this helps the company to reduce uncertainty in the market and foster the growth of their asset, it raises particular concerns in the trading environment. Investors are worried that a large amount of XRP can be brought into circulation at once, thus reducing the value of the Ripple coins already existing on the market.
Ways to Invest in Ripple
If you decide to add Ripple (XRP) to your portfolio, you can choose between two common ways of investing in this crypto asset.
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Buy and hold. This approach implies that investors buy XRP and hold it, expecting its price to increase. This way to invest in Ripple is simpler than trading, however, it still requires particular knowledge and skills, since XRP, like other cryptos, is considered a highly volatile and risky investment.
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Trading. By opting to trade XRP, investors are trying to benefit from significant spikes in its value. However, it’s crucial to remember that trading not only allows for increased potential profits but also amplified losses, especially if a trader doesn’t have enough experience and skills. It’s worth mentioning that apart from trading XRP on the spot market, it’s possible to invest in XRP futures contracts. This derivative instrument allows investors to use leverage and gain greater exposure to the Ripple market, yet note that it comes with potentially higher risks.
What’s Happening With the Ripple Lawsuit?
On 21 December 2020, the US Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs and its major stakeholders. The main allegation is that the company raised around $1.3 billion through illegal means. In the spotlight of the lawsuit is the question of whether XRP should be considered a security or not. SEC claims that Ripple gained significant profits illegally, since XRP wasn’t registered as a security despite being offered to traders globally. If they win the case, it could be a precedent for other cryptos to be reconsidered as securities.
When it comes to Ripple’s response, unlike other companies involved in legal actions, it boldly entered the battle. Its stakeholders claimed that they didn’t receive any notice or warning from the SEC. Moreover, they stated that this is not just an attack against their company, but the whole crypto and blockchain industry.
There is still no verdict on the Ripple vs. SEC lawsuit. However, the final decision of the court will have a significant influence not only on the XRP price but also on the development of the whole cryptocurrency market.
Is Ripple a Good Long-Term Investment?
Every investor has to answer this question individually, comparing the core features, pros and cons of this asset with their trading experience, knowledge, skills, ability to accept risks, and more. In general, Ripple could be a profitable long-term investment. It is a scarce cryptocurrency, meaning that its price is likely to increase in the future due to a growing limit in its supply.
Conclusion
XRP is a cryptocurrency running on the RippleNet network. It’s built on the XRP Ledger, which has some differences from usual blockchains. This is the reason why Ripple (XRP) is often believed to lack decentralization. Moreover, unlike other cryptos, XRP cannot be mined. The amount of coins is limited to 100 billion.
When considering adding XRP to your investment portfolio, it’s important to be aware of its benefits and limitations. This digital asset stands out among its competitors with significantly faster transaction speed and much lower costs, and also being more affordable due to its low price. However, it’s important to remember that XRP, just like other cryptos, is associated with high volatility, making it more complicated to predict its price fluctuations. Moreover, the Ripple company is now involved in a lawsuit with the SEC, the result of which could significantly influence the future of their native coin and the crypto market in general.
Price chart of XRPUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.