What a year Ripple (XRP) has had. At the end of the week last week, the coin rose more than 50%, to a record market capitalization of $85 billion. At the start of play on Tuesday, this has risen slightly higher to just shy of $96 billion (having briefly topped out above $100 billion over the weekend).
When you look back over the year, this translated to overarching gains of more than 35,000%. In contrast, bitcoin (BTC) and Ethereum (ETH) have risen just 1,400% and 9,000% respectively. While the latter two have dominated headlines in mainstream media, therefore, it’s Ripple that’s really been the runaway winner.
The question now, of course, is can things continue like this?
Well, here’s where things get a little complicated.
The thing is, there’s a degree of disconnect between XRP and Ripple, the company, and it’s platform Ripple Net. The latter is a platform created by Ripple that allows banks to transfer currency cross-border and between one another practically instantly and for a much lower fee than is currently required. To make a comparison to current fiat systems, it’s designed to essentially replace the SWIFT system.
It works great and it’s being taken on very quickly (mostly as part of pilot programs) by some of the biggest names in the financial world – Bank of America, RBC and UBS, as well as a consortium of big-name Japanese banks.
So that’s all good but it doesn’t guarantee that we will see a concurrent rise in price in XRP. For the banks using the Ripple Net platform, the only part of the transactions process that requires XRP is the fees associated with the network.
This means that XRP use and (by proxy) acquisition should increase as the platform becomes more mainstream but the XRP used for fees is relatively low, so it’s not going to be what drives this coin to $100, $500 and beyond.
That’s not to say it won’t get there, however.
The Ripple Net platform is designed to integrate seamlessly with XRP. So, while banks can essentially use any form of crypto to act as a bridge between two types of fiat on either side of a transaction, XRP is as good, if not better, than all of the alternatives.
What it looks like Ripple is doing right now is going at the banks with a sort of two-stage proposal. First, adopt the Ripple Net platform as the basis of your cross-border exchange transactions. Then, adopt XRP as the bridge currency that facilitates the transactions. If the banks are using the Ripple Net platform and they subsequently have to decide on a crypto token to serve as bridge, it makes sense for them to use XRP, but it’s not guaranteed. We know that banks aren’t always (if ever) sensible in the way they adopt and employ technological advance.
So, that’s where the speculative element of a position in XRP is rooted. If the company can persuade the banks to use XRP as a bridge, we could be looking at $100 or more before the end of the year, perhaps sooner.
If not, we’re still going to see an increase in price (as banks buy up XRP to meet transaction fees on their cross-border payments), but it may be a little tamer than would otherwise be the case if banks go all in on Ripple Net platform and the underlying XRP bridge.
Bottom line – there’s still plenty of run room left here, the only question is how far things can run and how soon it happens. And this question is to be decided by the big banks.
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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency
Image courtesy of Ripple.
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