Ripple is a blockchain payment protocol used by some financial institutions. It’s been around since 2012, which makes it one of the original blockchain start-ups. But it remains a cheap digital investment compared to its peers.
Cryptocurrency coins and tokens enjoyed a bull market in 2017, which capped in early January 2018. At this point XRP reached an all-time high of $3.84 but it crashed spectacularly after that. This year it’s seen further volatility. Despite being up 285% year-to-date, it’s down 52% from its April high. These past couple of weeks have been brutal in the crypto markets.
Nevertheless, $XRP is still cheap in comparison to $BTC, $ETH, $DOGE and more. So why could that be?
A short history of Ripple XRP
The company behind Ripple was initially named Opencoin but changed to Ripple Labs in 2015.
It was originally set up to have a go at solving the world’s cumbersome payments infrastructure. By adopting the blockchain technology Ripple is built on, institutions can benefit from faster transaction times, lower costs, and better reliability.
While there are other enterprise blockchain companies, Ripple is the only one with products in commercial use by hundreds of customers across more than 55 countries.
What is XRP?
Ripple’s global network uses its XRP Ledger complete with native digital asset XRP which is Ripple’s cryptocurrency.
Ripple is not decentralized like Bitcoin, its centralized and interwoven with the global financial community. For fans of decentralization XRP does not appeal, but for those wary of cryptocurrencies, the collaboration with financial institutions gives it an air of credibility.
Being centralized, gives Ripple reason to welcome government regulations. That’s because it will set clear guidelines on how cryptocurrencies should behave. It should safeguard consumers and the cryptocurrency. This will make Ripple very appealing to those that fear the unknown and unregulated world of cryptocurrency. Therefore, it should also help the Ripple price rise.
RippleX is an open-source developer platform that allows anyone to build services and programs on the XRP Ledger.
Meanwhile, Ripple’s product xCurrent connects RippleNet. It provides the framework for banks to send and settle transactions with speed, transparency and efficiency.
Well known companies running services on RippleNet include Santander (LON: BNC), Lemonway, American Express (NYSE: AXP), SBI Remit (TYO: 8473), Novatti (ASX: NOV), Banco Rendimento and hundreds more.
Other notable companies involved include MoneyGram (NASDAQ: MGI) and Azimo.
What’s going on with Ripple and the SEC?
Ripple is embroiled in a legal battle with the US Securities and Exchange Commission (SEC). The SEC alleges that XRP is a security and so claims Ripple is violating federal securities laws by selling XRP cryptocurrency to retail investors. To sum it up, Ripple is accused of illegally raising $1.3 billion by selling an unregistered security.
The battle is ongoing and Ripple’s defense hinges on the fact that when it started in 2012, it had no way of knowing it was operating a security requiring SEC registration. In fact, it’s using some of the SEC’s own previous media statements as evidence to argue its case. This has led to some small triumphs for Ripple Labs thus far.
The SEC/Ripple investigation has dragged on a long time and it’s probably a big reason for XRP’s price staying suppressed in comparison to its peers. If the investigation concludes that Ripple has done no wrong, then the price of XRP may well explode.
It’s a court case being closely watched by crypto investors and the community as it may set a legal precedent for other cryptocurrencies in the future.
Will Ripple IPO?
A rumour began last month that Ripple may be planning an initial public offering (IPO). During a recent earnings call, Yoshitaka Kitao, CEO of SBI Holdings (TYO: 8473) said Ripple’s CEO and Executive Chairman are both interested in going public. SBI is a Japanese financial services company and Ripple’s biggest external shareholder.
Once it’s put the SEC settlement behind them, many Ripple fans would see this as an exciting direction to take. And SBI would like to see it happen because then they’ll recoup their investment.
Yoshitaka Kitao, CEO of SBI Holdings said:
“After the current lawsuit, Ripple will go public. The current CEO wants to do that. Chris wants to do that,”
Diginex (NASDAQ: EQOS) made history last year as the first cryptocurrency exchange to list publicly. Spurring on others to follow suit. And now, it’s widely expected that a spate of crypto related IPOs are in the pipeline.
Brad Garlinghouse, CEO at Ripple said:
“In the next 12 months, you’ll see IPOs in the crypto/blockchain space. We’re not going to be the first, and we’re not going to be the last, but I expect us to be on the leading side. It’s a natural evolution for our company,”
What is Ripple’s market cap?
There are 100 billion XRP coins in circulation. These cannot be mined and were all created at its inception. Today its market cap is around $38 billion. This puts it in the top eight cryptocurrencies by market cap. To put it in perspective, Bitcoin’s market cap is $680 billion and Ethereum is $260 billion, the rest of the top eight fluctuate around the $30 billion to $60 billion mark. This includes Ripple (XRP), Tether (USDT), Dogecoin (DOGE), and Cardano (ADA).
Is Ripple an ESG friendly crypto?
Since Elon musk dropped the bombshell that Tesla’s no longer accepting Bitcoin for cars, crypto fans have been guessing what it could mean. Musk’s reason is concern for the environment, so there’s huge speculation over which cryptocurrency Tesla might choose instead. Being that Musk is a huge Dogecoin fan, many believe it the obvious choice. But the debate is strong and XRP appears to be one strong contender.
According to the Ripple website, $XRP is approximately 57k times more energy efficient than $BTC.
Read our previous article: Are there any ESG friendly cryptos?
Why is XRP cheap?
So why is XRP cheap in comparison to its peers? The SEC investigation is no doubt the main reason. It put doubts in investors’ minds and now around 15 cryptocurrency exchanges have suspended trading in the XRP token.
Some of these exchanges include main players Binance, Coinbase (NASDAQ: COIN), Crypto.com, Wirex, Bitstamp and Bittrex. Thus, making it difficult for people to buy, as many retail investors prefer to stick to one exchange and not have their crypto purchases dotted about.
Being centralized is also a problem for some investors. Those who doubt the credibility of large financial systems are suspicious that a centralized network is manipulated.
Ripple releases 1 billion XRP each month, increasing the number in circulation. This didn’t make much of a move in the price of XRP in May, but it could contribute to preventing the price from rocketing.
Ripple does have some real-world use cases which gives it more credibility than some cryptos have. Nevertheless, it has some challenges ahead and may struggle to even reach $5 due to its massive number of coins circulating.