Bitcoin blew up last year.
It’s cooled off since then. But its value rose over 1,000% in a single year.
And yet, that wasn’t even the best-performing cryptoasset last year.
I know. I was shocked, too.
Instead, that award goes to Ripple.
All of the attention last year was on Bitcoin’s rise and the insane ICO market blowing up.
Despite all that, Ripple largely flew under the radar of the mainstream media. Even though this is where the smart investors were paying attention.
But… should it be worthy of more?
I’ve got to admit, I’m not the biggest fan of Ripple. It goes against the very idea of decentralized currencies.
But from a pure investment standpoint, I think it has a lot of potential.
Ripple did explode at the tail-end of the year. But was that just a temporary blip on the radar, or a sign of longer-lasting, sustainable growth?
Let’s find out.
Ripple is a platform similar to Ethereum.
Except, it’s market cap is the second-largest after Bitcoin, despite a much lower price point.
But here’s the graph that got my attention:
Bitcoin’s 1000% increase was impressive. But it pales in comparison next to Ripple’s 36,000% jump.
That was more than enough to have it top the list of best-performing cryptoasset classes.
But here’s the thing:
Where does Ripple go from here?
It’s highly unlikely that its 2018 performance will come even close to last year. So is it already too late? Is it already too hyped and overvalued?
Or does it still have something left in the tank?
Personally, I do think it shows signs of promise.
I’m going to explain why. But first, let’s explain how Ripple works, first.
You know how Ether is traded on Ethereum?
Well, XRP is traded on Ripple. So it’s a decentralized platform that validates new transactions through several different entities in real-time.
That means global transactions can occur instantly (almost no confirmation time), with also less fees in comparison to bitcoin transactions.
The good news, bad news here is that Ripple was created and owned by one company: Ripple Labs.
Decentralization is ideal. The same goes for the entity behind it. Bitcoin, for example, has a massive, growing network of developers contributing to the ecosystem.
Other new options, like the Polymath Network, are also banking (literally) on community involvement to help grow the platform.
That’s not the only way Ripple is different, though.
Most coins can be mined or issued at will. Instead, Ripple opted for a fixed supply of 100 billion XRP tokens. And most of those are still owned by Ripple, themselves.
The other key difference is that Ripple actually isn’t even on the blockchain. It’s based on HashTree technology, which is a persistent data structure that records key hashes.
All of these differences have a big implication.
Ripple’s goal is more geared towards simplifying global payments for large organizations as opposed to individual trading.
They cite how global payments cost up to $1.6 trillion annually, in addition to long lag times of up to five days and still high fail rates.
So they want to move money, everywhere, as fast as possible.
Here’s a simple way to compare it:
Not only volume, but Ripple can also process payments in as little as 4 seconds. Compare that to Visa’s standard 3-5 days and it’s no contest.
Especially when you consider that the underlying technology is still decentralized. Bits of data is stored globally in different places, making it much harder to hack a central entity.
All of these positives are a big reason why Ripple is now being considered as an alternative payment system for global banks.
They’ve got partnerships with CIBC (Canadian Imperial Bank of Commerce), UBS, Banco Santander, and Unicredit. Those are some of the largest banks across North America and Europe already.
But they’re also working on deals with alternative financial service companies, like American Express.
AmEx card holders can send payments over to Banco Santander customers using Ripple, instead of their cards.
This mainstream adoption by banks, who are notoriously risk-averse, is one of the biggest positive trends Ripple has going for it.
Now, let’s dive into its current valuation to see if it’s overpriced or just-right after a 36,000% run up already.
Ripple valuations shot up at the end of 2017…
… only to start sliding shortly after, shedding almost all of its gains.
Check out this volatility:
Ripple’s XRP was trading for only $0.006 per token at the beginning of last year.
It shot up to $3.35 by the end. And now it’s trading at $1.09, posting an 81% decline compared for 0.00011819 BTC. Ouch.
You can tell it’s still incredibly speculative so far.
But let’s start peeling back the layers.
Remember that there was only 100 billion XRP created? Well, Ripple Labs still reportedly owns 61% of it.
That means there’s 39 million being traded, which is almost double Bitcoin’s current 21 million coin count. So you have simple supply vs. demand on one hand.
However, there’s something else you should know about the company behind Ripple.
It was created by Chris Larsen. He went from Stanford MBA to founding e-Loan in the nineties and Prosper a few years ago.
Both are successful Silicon Valley payment companies, with Prosper reaching a valuation over over $1 billion.
So the dude knows what he’s doing.
He’s been operating in the same space for over twenty years, successfully. He’s on his third-act now, that counts major banks as some of its 100+ customers.
Personally, I like to see big, thriving communities backing new crypto coins. It tells me it’s a sustainable technology that will be around long after the speculators.
Just looking at the trading volatility, Ripple seems like a pure-speculation play. However, when you consider all the underlying facts, it’s clear the ceiling could be a lot higher.
It’s got a legitimate team running the show. It’s working directly with banks already, compared to other coins that will always be positioned as a competing alternative.
And they’re setting it up so that big-bank customers are using Ripple as a payment method, without realizing the risk or getting bogged down by the technology.
That makes it a very interesting proposition.
As a pure cryptocoin, I can’t really get behind it. There’s virtually zero decentralization. There’s not a huge active community behind it, either.
And yet, there is a lot of interest at over 176,000 members in its subreddit indicate.
However, as an alternative method of payment that’s already seeing adoption with banks, I can see the appeal. It’s secure, storing data all over the world to safeguard transactions.
One of the biggest hurdles to liquidity — mainstream adoption — is already taking place. Regular folks are starting to send international payments with it.
Without ever needing to jump through any technological hoops that usually derail mass markets.
There are several key flaws that are potentially suppressing Ripple’s valuations or leading to its extreme volatility.
However, with each new bank that signs up as a partner, the likelihood of success rises, too.
Currently, you can’t purchase XRP with cash or PayPal.
That means you’ll first have to convert it into bitcoins. Then, you can use a service like Binance to get XRP.
Not only is it one of the fastest growing exchanges, it’s also one of the cheapest.
Keep in mind, however, that you never want to keep XRP locked away in an exchange.
The fastest method is to always store it in an offline wallet like Ledger Nano S.
Otherwise, Kraken is another solid exchange.
It’s been around since the very beginning in 2011. Kraken was also one of the first to offer Ripple, so it’s among the biggest platforms in the space.
The other big benefit is that even though Kraken is based in San Francisco, it offers huge trading volume into euros, pounds, and yen. So it’s massive international reach should be no problems with liquidity.
On the surface, Ripple is an interesting case.
It’s owned by one company. There is little-to-no supporting community, largely because they don’t need it. So it’s not decentralized.
It’s initial offering was capped at a restricted amount, with that one company still owning a large majority of the shares.
It’s valuation shot up last year, only to fall back down to Earth this year.
So it just seems like pure speculation.
And yet, there are a lot of glowing signs, too.
>> It can handle transaction volumes that rival Visa at up to 50,000 transactions per second, which is about 49,995 more than Bitcoin.
>> Processing takes as little as 4 seconds, compared to Visa’s three to five days.
>> And unlike Visa, weekends don’t hold processing back, allowing for transactions 24/7/365.
>> It was created by someone with a successful track record in online payments, leading companies valued at over a billion dollars.
>> It has around twice as many active shares as Bitcoin
>> They’ve signed up over 100 customers to date, with no signs of slowing down.
>> Many of which are some of the biggest international banks and financial service companies in the world.
>> And regular, mainstream people are beginning to send payments with it, without even being aware of how it works or that they’re using crypto technology in the first place.
>> So there’s no tech hurdle to potential adoption, leading to greater potential liquidity
Phew. That’s a lot of Pros.
When you put it that way, the case starts to become pretty compelling.
Crypto purists probably won’t like Ripple for a whole host of reasons. But that doesn’t mean it’s going to keep going growing.
But, if we’re being honest with each other, it might still work out despite all those supposed flaws.
Of course, everyone should do their own research, though. Ripple is far from a perfect investment based on a whole slew of reasons.
What’s your final verdict?