Ripple is one of the best-known cryptocurrencies globally. It is one of the oldest blockchain projects and is owned by most people who trade digital currencies. In this article, we will look at what Ripple is and the recent trends in its price movement. Further, we will focus on whether it is a good investment in 2022.
What is Ripple?
Ripple is an American blockchain project owned by Ripple Labs. Over the years, the company has raised millions of dollars from investors, giving it a private valuation of over $15 billion and its management hopes to take it public in the coming years.
Ripple is different from other cryptocurrencies like Ethereum and Bitcoin because of its industry. Unlike Bitcoin, Ripple focuses on the remittances industry.
It achieves this by partnering with the leading companies in finance and money transfer. Some of the companies it has partnered with are Santander and Ria Money Transfer.
These companies take advantage of Ripple’s on-demand liquidity (ODL) to ensure that money moves globally fast and at a significantly lower cost.
The Ripple ecosystem is powered by XRP, which is one of the leading cryptocurrencies in the world. At the time of writing, XRP has a market cap of over $37 billion making it the 7th biggest cryptocurrency in the world. German investors in Ripple can benefit by having some exposure to the coin.
What moves XRP price?
There are several factors that move XRP prices. First, like all cryptocurrencies, its price is affected by the actions of the Federal Reserve. Ideally, the coin’s price tends to rise when the Fed embraces an expansionary policy such as when it lowered interest rates and embraced an open-ended quantitative easing policy after the Covid-19 pandemic.
Second, the XRP tends to react to new partnership announcements by Ripple Labs. Since Ripple Labs serves companies in the money transfer industry, an addition of more partners is usually a sign that more firms are gaining confidence with the platform. For example, its price rose when Ripple Labs announced a partnership with Tranglo.
Third, the XRP price reacts to the ongoing case in the United States. In December 2020, the Securities and Exchange Commission (SEC) launched the biggest case in the blockchain industry. It accused Ripple Labs and its executives of raising capital without following the law.
Ripple Labs has rejected these claims and vowed to litigate them to the end. Therefore, in the coming months, the XRP price will react to the outcome of the case. A victory by Ripple Labs will be a positive thing for XRP prices since it will lead to more partnerships and renewed confidence in the coin.
Finally, the XRP price tends to have a close correlation to Bitcoin. In most cases, XRP tends to rise when Bitcoin rises and vice versa.
Is Ripple a good investment?
Ripple is a relatively controversial cryptocurrency. For one, most people argue that it is really not a cryptocurrency because of how centralized it is. Unlike most cryptocurrencies where most decisions are made by the community, Ripple Labs has a big say in how the network works and the number of XRPs that are released in the market.
Like all other cryptocurrencies, XRP is a relatively volatile cryptocurrency. For example, at the time of writing, its price has dropped by more than 40% from its all-time high.
Still, there are some of the top reasons why many people believe that it is a good investment. First, Ripple is addressing a challenge in an industry with a large total addressable market as globalization continues. On every given day, transactions worth billions of dollars are processed by banks and other money transfer companies.
Another reason to buy Ripple is that, historically, its price performance has beaten other leading assets like stocks and gold. For example, in the past 5 years, its price has risen by more than 12,000% while the benchmark S&P 500 index has risen by less than 100%. Still, in investing, past performance is not usually a sign of future performance.
Meanwhile, based on a risk and reward ratio, it makes sense to invest a small amount of money on XRP as a way of betting on the outcome of the Ripple vs Ripple case. If Ripple Labs wins the case, there is a likelihood that the XRP price will rise. Therefore, if you have small investment, you will benefit from this.
Finally, Ripple is set to launch its smart contract features, which will enable developers to build on its network. This could lead to more demand for XRP.
Summary
Ripple is one of the best-known blockchain projects in the world. As a result, XRP has become a favorite coin among some investors, which has pushed it to become a top 10 cryptocurrency. Therefore, as mentioned, German investors can benefit by having some exposure to the coin. The biggest risk is if the company and its executives lose the case. The implication will be that some companies could announce that they will stop using the network.