Shutterstock
TheXRP price is wayhigher than it was at the start of the month—even thriving amid yesterday's20 percent crypto market drop-off—here's why.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
December has been a banner month for XRP, the native asset of Ripple. The first surge took place Dec. 12-13, wherein Ripple leapt 84 percent—from $0.27 to $0.51. In the days that followed, it grew again, finding a resistance barrier around the $0.75 mark. Then, yesterday, Ripple shot for the moon again, surging 64 percent in 17 hourspast the $1 milestone, progressing all the way to$1.37.
Disclosure: I own someXRP.
Prettyastounding for a coin that began December trading at $0.24. A little over a dollar might not immediately sound like a huge change, but that's well over 400 percent growth in one month.Though we witnessed amajor drop-off yesterday, whereinthe overall cryptocurrency market cap dropped by as much as 20 percent, Ripple has been hit proportionately less than others, remaining above its yesterday mark.
So what's causing this explosion in price? Here are5 reasons.
1. Rise of the Altcoins
Shutterstock
Late-November saw Bitcoin crack $10K, and shortly thereafter the announcements of bitcoin futures trading on Cboe and CME. The attentionthat ensued—both from the media and mainstream—has been unprecedented in the world cryptocurrency, drawing hordes of newcomers to the space.
Many of these newcomers begin their crypto journey onpopular brokerage Coinbase (more on this in a minute).For most of December, Coinbaseonly supportedthree cryptocurrencies:Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC). Of those three, most investment has traditionally poured into BTC and ETH, but early this month, we saw consumersgraduateto Litecoin,causingseveral major jumps, peaking at $390beforecoming to restaround$320.
Now that Litecoin has hit its initial resistance barrier, the natural impact has been thatmotivated participants have sought new avenues for investment. This has precipitated wild growth among many different cryptocurrencies, including: TRON (TRX), Cardano (ADA), Stellar (XLM), Bitcoin Cash (BCH), QTUM, Verge (XVG), and Reddcoin (RDD), among many others—bringing the overall cryptocurrency market cap to a record high of $611B before the Bitcoin drop-off we saw yesterday, which brought it backto $508B at the time of this writing.
As one of the oldest, most established and time-tested cryptocurrencies, it's no surprise that investors turned toit early in their crypto investing.
2. Partnerships& Media
American Express Co. chip credit cards are arranged for a photograph in Washington, D.C., U.S., on... [+] Monday, Oct. 16, 2017. American Express is expected to release third-quarter earnings figures on October 18. Photographer: Andrew Harrer/Bloomberg
As a team of finance, technology and fintech veterans, Ripple has demonstrated a clear understanding that an emphasis on partnerships and customer acquisitionis an invaluable way for emerging technologycompanies tothrive.
Ripple now has over 75commercially deploying customers—and over 100 currently on their roster. But more than just establishing a customer base, Ripple has used strategic partnerships to generate buzz. For instance, the recently announced partnership with American Expresswasmany Americans' first encounter with Ripple—and immediatelysituated the brand as a reliable financial service, rather thana weird or intimidated new technology.
While these efforts have generated organic press, Ripple is also clearly doubling down on its media effort—with coverageramping up over the past month. More notably, last weekthe San Francisco company hired Tom Channick, the former corporate communications manager for Facebook's advertising and business integrity unit, as its head of communications.
3.Asia
Asia plays a key role in this strategy. As Ken Rapoza pointed out, Asians are "going mad" for Ripple. This is not an unfounded claim; last year, Ripple partnered with SBI Holdings to launch SBI Ripple Asia to serve markets in China, Japan, Korea, Taiwan, and ASEAN countries by establishing a dedicated sales and engineering group tasked with selling and installing solutions for cross-border bank payments.
"People feel comfortable with its name and the technology behind Ripple," said Trevor Koverko, CEO of Polymath, in an interview with Rapoza. "A lot of people are beginning to realize how big of an opportunity there is between business and the blockchain...and that's making Ripple the early winner here."
4. Coinbase Rumors
A branded coffee mug is seen at the Coinbase Inc. office in San Francisco, California, U.S., on... [+] Friday, Dec. 1, 2017. Coinbase wants to use digital money to reinvent finance. In the company's version of the future, loans, venture capital, money transfers, accounts receivable and stock trading can all be done with electronic currency, using Coinbase instead of banks. Photographer: Michael Short/Bloomberg
The effect of this media boom is a major uptick in rumorsthat Coinbase will soonsupportXRPbuying, selling, and trading on its platform. The widespread assumption is thatif that occurs, a whole new crop of buyers willstartinvestingin XRP.
For perspective, Coinbaseis adding around 100,000 new users per dayandrecently surpassingYouTube as the #1 app on the Apple App Store.Therecent additionofBitcoin Cash, which causeda media frenzyon Dec. 19, demonstrates the weight Coinbase holds in cryptocurrency worldwide.
5. XRP Functionality & Consumer Grasp
Many coins right now are bought and traded based on pure speculation—and there's nothing wrong with that per se; it's how many young altcoins with great ideas will flesh out their networks beforethey're fully operational. But it also means that those currencies are backedalmost exclusively by ideas and public belief in those ideas, which is a dangerous position to be in when something like yesterday's drop comes into play.
Positioned as a multi-pronged solution for major financial institutions (which aren't going away any time soon), Ripple is actually a useful product to itscustomersnow—regardless of what it will or will not build in the future—and thesecustomershappento be some of the biggest financial institutions in the world.And it's speed (4-second transactions) and lowfees also make it appealing to general consumers.
This is also supported by how Ripple itself functions. XRP is a pre-mined coin, which has drawn criticism for going against the ethos of decentralization and the lack of mining opportunities that creates. Moreover, Rippleretains a full 20 percent of the total supply of XRP. While this too has upset some in the crypto community, it also somewhatimmunizes it tothe volatility we see in other coins. AsTechno Rajji explains in an article written forOracle Times last month:
Due to this limited number of XRP coins, the currency may continue to flourish or at least hold its ground in the future if crypto prices fall.
For better or worse, higher supply means lower volatility, and more centralization means more moderation of the market.
So, will the current growth rate last?Current market trends indicate that we'vetouchedthe nearest resistance barrier after $1 ($1.25).According to Sam Bourgi on Hacked,the next major resistance barrieris$1.50. Taking the past few weeks as an example, we might expect to see a few weeks of trading in the $1.25-$1.35 range to solidify the base before another big jumptoward the $1.50 mark. Of course, that's leaving out a sudden event such as a Coinbase announcement or a crypto market correction.
On the other hand, in"The Bear Case For XRP: Bitcoin Futures Edition,"Kyle Samani makes the case for a less optimistic view,questioning the long-term validity of XRP's use cases against more a established coin like Bitcoin while acknowledging that XRP still might have asubstantialamount of growth left:
We maintain our position: in the long run, we’re bearish on XRP. We simply don’t see any series of events that can occur that would cause financial institutions to voluntarily adopt XRP over the global reserve. Having said that, given the state of crypto markets today, XRP could keep pumping. There’s really not a good objective valuation model for XRP given the intrinsicvelocity problemthat it faces, so it could 5x before our thesis is reflected in XRP price movements.
Whateverends up being the case, Ripplehas proven itself as one of the most fascinating cryptocurrencies to watch. Stay tuned to "Crypto Watch" for up-to-date coverage of Bitcoin, Ripple, and other altcoins.
Editor’s Note & Disclosure: The authorinvests in cryptocurrency markets. Neither the author norForbesendorses participation in any token sale or cryptocurrency investment, all of which have significant inherent risk. Seek advice from a financial advisor as well as do your own due diligence before considering investment.
