- Ripple’s XRP is the third largest cryptocurrency by market cap after Bitcoin (BTC) and Ethereum (ETH)
- XRP has gained over 150% this week, having risen over 50% in just the last 24-hours
- The price has gained from a low this year under $0.20 to now over $0.65 – but remains well below all-time highs recorded in late 2017 of near $4.0
- The latest surge came after the company Ripple said it would seek to take advantage of central banks digitalising their currencies by offering use of the XRP ledger
- New US banking and currency regulations could help narrow the gap with Bitcoin
- Technical Analysis: XRP has broken out above a 2-year down-trendline
Ripple (XRP) 3-years
Ripple, the owner of 60% of the outstanding XRP coins – located in San Francisco wants to hire a ‘Director of Central Bank engagements’ to make Ripple a part of the move towards central bank digital currencies (CBDCs). This month Ripple CEO Brad Garlinghouse suggested central banks could use the Ripple architecture, the XRP ledger to issue and to exchange digital forms of fiat currency. The global use of its ledger would in theory massively add to the value of each XRP coin.
Refresher: What is XRP?
This is how Ripple describe their business:
XRP is a digital asset built for payments. It is the native digital asset on the XRP Ledger—an open-source, permission-less and decentralized blockchain technology that can settle transactions in 3-5 seconds. XRP can be sent directly without needing a central intermediary, making it a convenient instrument in bridging two different currencies quickly and efficiently.
Faster, less costly and more scalable than any other digital asset, XRP and the XRP Ledger are used to power innovative technology across the payments space. Ripple is focused on building technology to help unleash new utility for XRP and transform global payments. Third parties are also pursuing other XRP-related use cases
We can see from the above the Ripple is positioning XRP as not necessarily a currency from which to make payments – but with which to transfer from one currency to another – as a convenient means of exchange. The emergence of CBDCs and the possibility of digital currencies that need an infrastructure like the XRP ledger has moved this idea from remote possibility to a likely scenario.
The major catalyst for the jump in cryptocurrencies of late has been the belief that the industry is on the verge of mass adoption by the general public as a means of exchange. We would argue the main catalysts for that have been
1. Moves from Square & PayPal to increase use of cryptocurrencies in their services AND 2. Research from central banks into Central bank digital currencies (CBDCs).
To learn more about CBDCs – read our blog Central bank digital currencies: CBDC FAQs
Ripple has now put itself at the centre of the central bank digital currency debate.
One of the features of the rise in Bitcoin this year has been the interest from professional investors, now more ready to consider it another asset class alongside the likes of stocks bond and commodities. Other cryptocurrencies like Ripple have been at a regulatory disadvantage to Bitcoin since bitcoin CME futures are regulated by the CFTC.
The US Office of Comptroller of the Currency (OCC) is considering a new bill that would prevent banks from blacklisting users of competitive financial networks, which might include cryptocurrency blockchains. The difficulty of navigating the banking system and US financial rules is thought have been a big hindrance to companies and institutional investors making greater use of cryptocurrencies.
It would appear that cryptocurrencies have taken a step closer to mass adoption but there are still many hurdles and it will likely take a lot longer than buyers of the recent price surge think. The price moves have turned euphoric. That could mean there is more to go but likely they will come down under their own weight soon after.
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