Let’s consider how Ripple is different from blockchain technologies, and look at the fundamental reasons why XRP could be the first – or only – player to emerge from the crypto bear market going into 2019. We’ll also highlight ways that investors and traders can find opportunities to ride the Ripple wave.
- XRP is much different from a blockchain crypto, so it creates distinct opportunities for investors and traders
- Ripple is looking more like a crypto as it expands beyond banking and currency exchange into retail e-commerce
- Ripple’s rise may be fueled by late adopters of distributed ledger technologies, especially in Asia
- Crypto regulatory pressures may spark a Ripple rally
Ripple isn’t really a blockchain crypto
Everyone knows that XRP is more like digital fiat currency or bank software than true crypto. There are many basic technical differences between Ripple and cryptos like Bitcoin and Ethereum. Ripple was envisioned as software for financial markets, not retail consumers.
XRP uses a distributed consensus ledger
Most people know Ripple as a real-time exchange and settlement platform created by Ripple Labs, Inc. in 2012 and intended for interbank use in which institutions integrate with Ripple. It’s built using a distributed open-source protocol, and it supports a digital token (XRP) that exchanges or transfers fiat, crypto, commodities, or any other units of value, such as customer-reward points or frequent flier mileage.
Since XRP behaves more like digital fiat than crypto, eventually it may be regulated as an asset-backed security, not as a utility. This model is entirely distinct from crowdsourced cryptos, and offers investors and traders many opportunities as a non-correlated yet parallel investment.
The platform is based on a shared public ledger. It uses a distributed consensus protocol that provides for exchanges, payments and remittances. The ledger uses the XRP cryptocurrency, which has recently overtaken Ethereum for the second-largest market cap after Bitcoin as of late 2018.
After a transaction, the commission of $0.00001 is subtracted from the platform and isn’t replenished. That helps reduce the chance of a DDoS attack, and it may also mean more opportunities for short-term forex traders by reducing slippage.
RippleNet is the platform’s network of banks and money transfer services. It’s available for cross-border payments in 40+ countries. Although transactions aren’t completely free, as mentioned elsewhere they’re microscopic.
xRapid is a relatively new Ripple product. It uses the XRP token for cross-border payment settlement services. Ripple has teamed up with Fleetcor, an international payment service provider, to create new products for various marketplaces. XRapid is especially interesting for small importers, exporters and remittance companies because it supports instant transfers, instead of waiting hours.
It’s important to understand that the Ripple protocol consensus algorithm (or RPCA) doesn’t use a blockchain. If you’re wondering how the platform can verify transactions and make decisions, the answer is in the patented algorithm.
Ripple uses this consensus protocol to verify whether each node agrees with every other node. It means that no decisions are made until each independent node of the system agrees with all others. So, the verification process is by consensus of the nodes, not by checking blocks in the chain.
XRP is more like cash than commodity
The Ripple shared ledger is on a network of nodes or validating servers that compare transaction records to reach a consensus. Even though it’s an open-source protocol, it’s not plug-and-play like full-node Bitcoin software. Nor does it rely on crowdsourcing, since it has institutional support.
Most important, it’s recognized by several governments as legal tender for transactions, which means instant liquidity and real-world buying power. These characteristics make Ripple a different kind of animal than other cryptos.
Ripple is doubly blessed – It walks and talks like a crypto, so investors and traders love it. But it isn’t like the other digital tokens being sold on speculation. XRP is like cash or an asset-backed coin, so it must be evaluated that way.
Ripple’s market cap is more resilient than Ethereum
Ups and downs in crypto prices are the norms. It’s important to note that during the general marketplace downturn over the past year, Ripple has lost proportionally less market capitalization than Ethereum. Individual strength in an overall weak marketplace usually signals success going forward.
For example, about one year ago Bitcoin was at $190 billion, Ethereum was $65 billion, and Ripple was $35 billion. Nowadays Bitcoin is about $64 billion, Ethereum $10 billion, while Ripple is at about $13 billion.
In other words, Bitcoin has lost about two-thirds of its market cap value when measured from high to low, and Ethereum is down about 80%. Yet, Ripple’s market cap has eroded by about two-thirds, only about the same percent loss as Bitcoin.
This implies Ripple is a more stable blockchain investment than Ethereum, regardless of whether purists consider it a true crypto or not. In any investment sector the companies which hold their values better during bear markets are the strongest candidates for future growth and success. This inversion between Ethereum and Ripple market caps signals that although Bitcoin still dominates the ecosystem, Ripple has become relatively more valuable than Ethereum.
Ripple expands beyond banking and currency exchange
Another factor that could spark a major price rise is Ripple’s move toward functionality beyond currency exchange. As the platform becomes more useful for e-commerce, and consumers continue to migrate toward a crypto economy, plenty of new investor interest should drive the price upward once again. As Ripple continues to take steps toward retail consumer services, XRP looks more and more like a “real crypto” that investors, traders, governments, and consumers can all love.
Less slippage during fiat conversion
Cheaper fiat conversion is another factor which suggests Ripple’s price may break out in 2019 and rocket higher, based on new interest from both currency traders and e-commerce sellers. Ripple’s recent partnership with Wirex lets you exchange XRP into several fiat currencies. Wirex also provides a crypto debit card with a cash-back feature for Bitcoin purchases at PoS terminals.
In the past Ripple required conversion to Ethereum or Bitcoin before exchanging for fiat. That older protocol meant investors faced an extra layer of exchange fees. They were forced to make a pass-through investment in Bitcoin or Ethereum before reaching Ripple. Independent traders couldn’t win because there was too much slippage during the extra conversion.
However, with Wirex and others you can ride Ripple now with fewer mediator transactions. If you’re an independent trader, there are plenty of opportunities to take advantage of marketplace inefficiencies between forex pairs. This new fiat functionality is also attracting interest from international travelers seeking ways to cheaply exchange currencies while on the go.
The bank is an elephant, you’re the (biting) fly
Banks and other jumbo investors are too big to liquidate chunks of XRP without moving the overall market price. By trading in and out of Ripple without paying double commissions, you’ll have better opportunities to profit from those slow-moving giants.
Beyond profiting from ordinary upward price moves in XRP, throughout 2019 traders might also expect to win fat gains by trading forex pairs and options – For example, by trading the spreads between BTC-ETH-XRP pairs.
XRP might be the best contrarian investment during a crypto bear market
Since it’s not really a crypto, XRP investors should expect a contrarian boost from the bear crypto market going into 2019. In other words, since Ripple is centralized and has other characteristics contrary to typical cryptos, the XRP price should rise when overall crypto prices fall.
A meteoric rise, then a snooze…. What’s next for XRP?
In the few years since its release, Ripple has risen quickly to become one of the top three cryptos for market cap, battling with Ethereum for second place after Bitcoin. Numerous banks and financial institutions have embraced Ripple across 40+ countries as of this writing.
Just like other cryptos, the price of Ripple first skyrocketed before selling off and settling down into a slump at the end of 2018. Ripple could be the first to break out and move upward, for several reasons.
SEC pressure may spark a Ripple rally
Regulatory decisions about other coins may spark a Ripple rally early in 2019.
XRP is a regulated, centralized cryptocurrency. So, it offers a non-correlated contrarian investment within the overall crypto ecosystem. It might be a good “anti-crypto” for investors worried that regulators may close their favorite playgrounds.
Short-term forex traders anticipating a Ripple rally should consider the SEC’s recent decision to reject proposed Bitcoin ETFs. The SEC decided that Bitcoin’s lack of regulatory oversight is too risky to allow the sale of a traditional investment based on it like an exchange-traded fund.
Yet, Ripple-based ETFs should receive a favorable response from the SEC, and become very popular with investors. There are also other opportunities to take advantage of the differences between XRP and other cryptos.
If you’re a trader facing signs of a crypto marketplace stalled by regulation, look for ways to play the rally in Ripple price following each fresh news release about government regulators clipping the wings of another wannabe ICO.
Ripple’s rise may be fueled by late adopters of distributed ledger & blockchain technologies
We’re now starting to come out of the hangover after seeing crypto mania that drove XRP upward along with Bitcoin and the rest of the crowd. But even while others are still recovering from the shock, Ripple could rise rapidly in 2019 based on demand by late adopters of distributed ledger and blockchain technologies.
Countries in Asia such as India and Japan, as well as nations throughout the Middle East, Central Europe and Africa are all now choosing which new fintech platforms to use going forward. Watching the progress of blockchain technology development from afar, the governments, investors and consumers in those countries have already seen crypto chaos caused by ICOs with utility tokens in major economies.
Ripple offers an attractive “legal tender” alternative for governments worried about losing that all-important central financial control. Investors and consumers burned by blockchain losses may also migrate from Bitcoin and Ethereum into XRP for comfort, since Ripple is fundamentally different from other cryptos..
Ripple is being accepted in Japan, which is the world’s third-largest economy. As adoption spreads throughout this huge economy, XRP will inevitably rally because of new demand. Over time, if Ripple can host even a small percentage of Japan’s total volume of B2B, P2P and P2B transactions, then XRP will certainly rally and move upward to the next major price level.
XRP continues to grow in acceptance across India. Several large banks have adopted the Ripple ledger platform, and more are expected to follow soon. Just like in Japan, this new Indian demand may drive the price of XRP up long before other cryptos recover from their price slump.
The Indian marketplace holds interesting opportunities for investors as well as developers. Agriculture in particular may offer rich opportunities for third-party Ripple app developers. Because agriculture represents about 50% of Indian employment, the government has begun pushing for technology solutions for food security, including P2P trading for staple foods and commodities.
Here’s another reason why Ripple may receive a price boost from late-adopting economies: India is an influential member of the BRIC group of fast-growing economies. Since India has already adopted XRP, its acceptance may convince the other member nations – Brazil, Russia and China – to also come aboard.
Several banks located in the United Arab Emirates are already providing cross-border settlements using the Ripple platform. Since UAE is a financial hub between Saudi Arabia, Qatar and other neighboring countries, it seems likely that those countries will adopt Ripple sometime in 2019. That adoption should drive XRP’s price upward, even if other cryptos don’t participate in the rally.
Although China is already a center of blockchain technology development, the government is slow to embrace decentralized cryptos. Ripple could be the perfect compromise for Chinese authorities who want the benefits of distributed-ledger technology with central control. Since China is the giant among Asian economies, if Ripple is accepted here then Australian, Indonesia, South Korea and Singapore would probably also accept it.
Ripple was created as banking software, and it’s not a decentralized blockchain crypto. Instead, it’s a distributed ledger system that relies on consensus between nodes for verification.
Because of its unique characteristics, and the fact that it’s already considered legal tender in three large global economies, the price of XRP might rally long before the prices of ordinary cryptos. Investors and traders should look for opportunities in the fast-growing late-adopter marketplaces such as India and China, where banking authorities might prefer Ripple over Bitcoin and other typical cryptos.