- Ripple wasn’t built as a store of value but a payment protocol
- It is the third-largest cryptocurrency by market cap after Bitcoin and Ethereum
- Since the prime objective of Ripple is bringing efficiency to financial transactions, it is important for XRP value to remain affordable so that people can purchase it to access RippleNet
Although Ripple ranks among the top three cryptocurrencies, it wasn’t built to be a store of value. It is primarily a payment protocol with a real-time gross settlement system, currency exchange, and remittance network. Based on an open-source platform, Ripple facilitates transactions of any currency on a global scale using a native bridge currency called XRP. Unlike Bitcoin, which works towards eliminating the role of financial intermediaries through a distributed peer-to-peer network, Ripple partners with them to provide a more efficient way to carry out cross-border financial transactions.
Ripple is a technology platform with its own native cryptocurrency called XRP. In the past, there has been much debate over whether Ripple is a cryptocurrency in the real sense of the term. Observers have pointed out that Ripple is not based on blockchain technology which is the hallmark of other cryptocurrencies. It is also owned and operated by a single company leading to concerns about centralized control.
Founded in 2012 by Chris Larsen and Jed McCaleb, Ripple is the third-largest cryptocurrency after Bitcoin and Ethereum with a market cap of USD 7.8 billion as of beginning April 2020. With total supply restricted to 100 billion XRP—all of which is pre-mined, and only 35% of which has been released in the market until now—Ripple is uniquely poised to revolutionize international finance by bringing greater efficiency to cross-border payments through significant reductions in cost and time.
The price of cryptocurrencies is generally influenced by demand and supply, where supply is derived through the mining of coins. But as XRP is 100% pre-mined, demand-supply economics tends to take a backseat to factors like technology and rate of adoption which become more important in influencing the price dynamics.
Below is a list of four important factors that are crucial to determining the value of XRP.
- Technology: This is a key factor in the case of Ripple. Prior to Ripple, international transactions were carried out using SWIFT which took a matter of days and was also needlessly expensive. Ripple has managed to cut the time requirement from days to seconds while bringing down costs to a fraction of what they were earlier. More technological upgradations are currently on the anvil which will no doubt create a positive sentiment for the asset in the market.
- Adoption and partnerships: Ripple’s promoters have pursued partnerships with banks and financial institutions with single-minded determination, finding a great deal of success in the process. Ripple has managed to strike up partnerships with Santander, Bank of Indonesia, SBI Holdings, along with a host of others. More partnerships mean greater adoption and more trust in the system.
- Whales: This is a term used to refer to those entities which own a large stock of any crypto-asset. Their ownership is usually so large that their actions often involuntarily end up affecting the market value of the asset. Whales may refer to either individuals or organizations. An example of the latter is South Korean cryptocurrency exchanges where Ripple is quite popular. In early 2018, a surge in trading on South Korean exchanges was responsible for a 24% rise in XRP price compared to global averages.
- Government policies: World governments are still coming to terms with the concept of cryptocurrency. They come up with rules and regulations from time to time which may affect the use of cryptocurrencies, and consequently the market value of these assets.
Ripple Price Analysis
Now that we understand the factors underlying the price mechanism, we are in a better position to carry out a Ripple price analysis. XRP started in 2012 at a price of USD 0.06 growing rapidly from 2014 onwards. It reached its first peak in 2017 when it touched USD 0.34 prompted by the opening of offices in Mumbai and Singapore.
In January 2018, it attained its highest ever level at USD 3.84 followed by a decline to USD 0.29 in September that year. Since then, XRP hovered in the USD 0.20-0.50 price band for many months. Recently it dropped to a low of USD 0.12 on March 12 in the wake of the coronavirus crisis.
While it is extremely difficult to predict the future price of a cryptocurrency with any degree of certitude, there are several forecasts to indicate how things could go, helping us to carry out a Ripple price analysis by referring to a variety of sources.
- LongForecast: LongForecast pegs the average price of XRP in 2020 at USD 0.26 declining to USD 0.15 in 2022.
- CoinSwitch: Anisa Batabyal of CoinSwitch.co estimates that Ripple could reach USD 1.20 by the year-end. She estimates it will touch USD 2 by 2021, USD 3 by 2022, and USD 4.52 by 2025. It could reach USD 17.06 by 2030 as per these calculations.
- WalletInvestor: WalletInvestor does not recommend Ripple as a short-term asset. It sees XRP trading at USD 0.46 in 2020, USD 0.58 in 2021, and USD 2.32 in 2025.
- TradingBeast: According to TradingBeast, the price of XRP will remain relatively stable at USD 0.36 in 2020 and USD 0.50 in 2022.
A Different Type Of Cryptocurrency
It must be remembered that the prime objective of Ripple is not to function as a digital asset but bring efficiency to financial transactions. In that sense, it is important for the value of XRP to remain affordable so that people can purchase it to access the RippleNet technology which supports its payment protocol. At the same time, a significant rise in XRP value cannot be ruled out. Ultimately, it is hard to ascertain which way things will go in the cryptocurrency world owing to volatility and unpredictability in the market.
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