Ripple (XRP) in Spotlight
Ripple, launched in 2012, is one of the oldest crypto coins in the market and was once the third-largest crypto asset by market capitalization. Although it has grown in terms of user adoption and market capitalization in the last few years, it is underperforming and struggling to catch up with the other new crypto assets—in terms of growth and returns.
Despite the market reaching new highs in the recent past, Ripple has nosedived and is failing to break past its former high. For instance, during the last 12 months, Bitcoin has moved up from the sub $30,000 level to make a new peak around the $68,700 mark, but XRP (Ripple’s native token) has dropped from $1.8 (₹159.636) to below $0.70 (₹55.51). It is significantly below its all-time high, of $3.1, made during the bull run of 2018.
Key Coin Metrics
Coin Rank: #6
Coin Market Capitalization (as of 24th Feb 2022): $33.3 billion
Coin Dominance: 1.99%
Coin Economics: Fixed supply
Coin Total Supply: 100 billion XRP
Coin Circulating Supply: 47.97 billion XRP
Technical Analysis: XRP Price Analysis
source: tradingview.com
The overall trend prevailing in the market is bearish currently. XRP is facing strong resistance at the $0.88 (₹69.78) level and a bit of selling pressure—largely due to the bearish sentiment. The $0.60 (₹47.58) level is the support point for XRP. If it breaks below this mark, it might be difficult to stage a recovery, and the price may drop to $0.40 (₹31.72), which is the next major support level.
A break above the $0.88 (₹69.78) level will be a very positive development and is likely to attract new buyers. If Ripple does manage to do so and increase its user base, it may send the XRP price above $1—a psychologically important level.
A Brief History of Ripple
Ripple Labs was originally founded in California as Newcoin in 2012. It was renamed a month later (as Opencoin), and then again in 2013 when it finally became Ripple Labs Inc.
Ripple functions as a currency exchange and cross-border remittance system. It is far more efficient and cost-effective than the SWIFT payment system currently used by traditional banks globally. It uses blockchain technology for routing payments through interconnected ledgers instantaneously.
Ripple Labs has three main products that it offers to financial institutions: xCurrent, xRapid, and xVia.
xCurrent is an enterprise software solution that enables banks and financial institutions to instantly settle cross-border payments in commonly traded currency pairs with end-to-end tracking. It uses a separate distributed ledger from XRP and doesn’t depend on XRP tokens for the processing of payments.
xRapid is the XRP network that acts as a digital payment system. It is faster than any current payment system in the world, including xCurrent.
xRapid uses XRP to facilitate transactions and can even handle less liquid currency pairs. Its payment network buys and sells XRP for currency and the settling of cross-border payments. The system is responsible for generating greater demand for XRP tokens, which will aid its price growth.
xVia is similar to xCurrent in functionality. It enables corporates and payment processing networks to access RippleNet with a single and standardized API solution. It’s like a mobile money system.
The partnerships with banks and financial institutions for the usage of RippleNet technologies happen for xCurrent, where there is least or no use of XRP.
Tokenomics of XRP
Compared to Bitcoin and Ethereum, XRP is pre-mined with a total supply of 100 billion tokens. However, the token distribution is a bit centralized.
Out of 100 billion tokens, 55 billion were held in escrow, 38.73 billion were distributed in the market, and 6.25 billion were given to Ripple Foundation.
Out of 38.73 billion tokens in the market, Ripple co-founder Chris Larsen holds 5.19 billion; another 5.3 billion are in the custody of Jed McLeb, former CEO and co-founder of the company who is now the CTO of Stellar. Additionally, 7 billion tokens were donated to Ripple Foundation For Financial Innovation.
In the overall token distribution, almost less than 20% of the total distribution is held by the public.
Furthermore, the 55 billion tokens held in escrow will be released gradually over the next 55 months.
Ripple has also integrated an XRP burn mechanism. In it, for every XRP transaction sent, 0.00001 XRP is burnt and removed from the supply.
The token distribution is not completely decentralized and prices can be easily influenced by the whales in the network.
Ripple (XRP): Future Growth Potential
Ripple is a revolutionary technology and was ahead of its time in the beginning, but now it has to compete with multiple players from both the world of crypto and the traditional financial system.
SWIFT has launched a new service called SWIFT GO to process international payments instantaneously, making it a key competitor for Ripple. However, the latter has the advantage of being cost-efficient and transparent, as transactions on it are processed on publicly verifiable blockchains.
Also, Ripple is trying to bring xCurrent and xVia into the xRapid fold. Once this takes place, it will result in increased adoption of XRP, creating greater demand for the token. When this will happen is uncertain for now.
What we do know, however, is this: A highly centralized token distribution, increased supply rate of tokens in the market, and lack of increased user adoption despite institutional adoption of technology will continue to affect the price of XRP in the short to medium term.
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