Investors need to be experts at blocking out noise and focusing only on the facts. In today’s cryptocurrency review we take a closer look at Ripple, one of the most popular cryptocurrencies that has a whole lot of noise surrounding it.
The SEC’s case regarding Ripple’s status as a security is nearing its end, which may present a great opportunity to buy Ripple before it gets relisted on exchanges. Let’s dig deeper and separate the truth from the noise before asking ‘Should I buy Ripple’?
What is Ripple and XRP?
Ripple is a US based company that focuses on cross-border payment solutions and payment infrastructure for commercial and investment banks. In their efforts to create a faster and more efficient solution than the legacy financial system the XRP cryptocurrency was created with the option of cold wallet crypto storage. As with most major cryptocurrency projects there is a distinction between the network (in this case the Ripple Network) and the native token (XRP) which is a digital asset that can be transacted on the network to protect cryptocurrencies.
It is important therefore to note that Ripple trading is somewhat of a misnomer, what people mean when they say they want to buy Ripple is that they actually want to purchase the Ripple network’s native token XRP. Think of XRP as the ticker symbol of the Ripple network which can be purchased on exchanges with private key security. Ripple and XRP are often used interchangeably for convenience, which is perfectly acceptable as long as we understand the distinction between the two. Ripple represents the company that develops the technology in tandem with their development team at Ripple Labs. The Ripple Network is the actual payment platform and digital infrastructure which XRP exists on.
The best way to understand this relationship is through a simple analogy of cryptocurrency custody. Imagine Ripple as the engineering and construction team responsible for the design and construction of a railway system (the Ripple Network) and XRP is the asset that is transported on this infrastructure. Similar to the manner in which rail technology improved upon previous forms of logistics, XRP boasted its competitive edge over its predecessors which we will consider in greater detail in the next section. XRP was considered a top contender to Bitcoin before the SEC case, let’s look at what made so many investors want to get into Ripple trading.
What is XRP used for?
There is no arguing that Bitcoin is the grandfather of the entire crypto space. This is not only true in the sense that it is the first mover and therefore the oldest, but it is also one of the slowest and least adaptable. For global borderless payments with a digital asset smart-card that are near instant with very low cost Bitcoin was not the answer. Bitcoin has since been reconceptualized as a store of value asset rather than a currency as such. This left room for another project to fill this void and Ripple rose to the occasion with XRP.
You may be wondering how does Ripple work so that it can achieve the low cost and high throughput that Bitcoin could not? The answer is that Bitcoin, like Ethereum, uses a consensus mechanism called proof-of-work. This consensus mechanism is highly secure, but slow and expensive. Ripple designed a unique distributed ledger system that does not use proof-of-work. It may not be as decentralized as Bitcoin or Ethereum but this enables it to achieve Visa levels of throughput and low cost.
Its speed and low cost made many invest in Ripple believing that it would soon be implemented by banks to help with remittances which are notoriously difficult and expensive through the legacy financial system as opposed to HSM crypto. Many still use Ripple today to transfer value from one exchange to another, however since the Ripple lawsuit, some notable exchanges such as Coinbase have delisted which means you cannot buy Ripple or even trade Ripple at these exchanges to help protect cryptocurrencies. The fewer avenues there for trading Ripple the less useful it becomes. Next we will take a closer look at the lawsuit to understand why Ripple was accused, the implications of the case and what we might expect in the near future.
The SEC vs. Ripple
Ripple has been embroiled in a lawsuit with SEC since December 2020 for raising $1.3 billion in what the SEC claims was an unregistered securities offering. The SEC contends that the XRP token is a private key security, which Ripple firmly denies. Assets that fall under the securities asset class are subject to a different set of laws than say digital property which Bitcoin is classified as. The SEC vs. Ripple lawsuit is extremely important to the whole crypto industry as its outcome may set the precedent for further actions against other crypto projects.
The standard for determining an asset as a security is the Howey test which has been the measuring stick for securities since the 1930s. When an investment is reasonably expected to be profitable based on the efforts of others, that investment is considered a security. Some argue that the Howey test is antiquated and should not be applied to the new digital economy, however, this is the metric as it stands today. If Ripple loses this case the consequences would be dire for investors and other cryptocurrency projects.
In 2017, ICOs (initial coin offerings) were an extremely popular vehicle whereby developers could fund their projects. Similar to IPOs investors would pay for a stake in the network or would receive tokens with utility in a crypto ecocsystem or network. Many of today’s most popular cryptocurrencies were funded in this fashion. If Ripple loses their case, it is not impossible that the SEC may continue to pursue some of these other projects which would result in extreme capital flight from the whole industry.
The magnitude of this lawsuit for the whole crypto space is thus substantial and a win for Ripple is a win for the industry. One of the primary factors inhibiting greater widespread adoption of cryptocurrencies is regulatory uncertainty. People are less inclined to buy Ripple when they believe there is a strong chance that it may become a registered security in the near future. The resolution of the Ripple lawsuit will provide greater clarity for investors which may bring with it greater institutional adoption. Next, we consider how the lawsuit affected Ripple in terms of price and if you should should buy Ripple now or only after the case is settled or not at all!
How the Case has impacted XRP price
The XRP price has been heavily suppressed by the news of the SEC trial. The last crypto market bull run was towards the end of 2020, Ripple was hit by the lawsuit in December of 2020 which stunted its growth. Anyone who was caught on the wrong side of Ripple trading during December 2020 would have been blindsided by the sudden lawsuit and the resulting price depreciation of XRP relative to the dollar.
While other cryptocurrency such as Bitcoin, Ethereum and Cardano went on to reach their all time high prices and market capitalizations, Ripple and its native token XRP came nowhere near to its prior all time high price of $3.37 in 2018 and instead we saw the price of Ripple trading between $0.2 and $1.2..
There were a few instances where XRP holders were treated to positive news in the case that saw XRP price pump to $1.5, but these instances were short lived and 2020 and 2021 were mostly difficult times for long term XRP investors who refused to sell their positions. The fact that the price did not drop to an even greater extent attests to the strong Ripple community.
One of the strongest indicators of future price performance is the strength of the community and Ripple certainly has that. Despite all the negativity that surrounds XRP it remains in the top10 cryptocurrencies by market capitalization and stands at the 6th position at the time of writing. The question remains, should I buy Ripple now? Well, that really depends on the outcome of the lawsuit which we discuss in the next section as well as the potential price implications.
Potential outcome and price implication
In the previous section we highlighted how the SEC. vs Ripple lawsuit has suppressed the price of XRP. Long term investors did not want to buy Ripple with the regulatory cloud hanging over it. However, it appears that the lawsuit is nearing completion, which could mean that the extended price suppression may now act as a compressed coil ready to launch the XRP into price discovery as people again start feeling comfortable Ripple trading. Ripple lawyers have stated that they expect the lawsuit to end between August and November 2022, which would be a major win for the entire crypto space and especially Ripple which will likely enable XRP to be relisted on several major exchanges.
Under the assumption that Ripple indeed wins the lawsuit let us consider the factors that will influence the price to help us decide should I invest in Ripple? First is the increased liquidity from XRP being relisted on major exchanges such as Coinbase. This means the volume of Ripple trading is set to increase significantly which could positively affect Ripple price as more people can buy Ripple.
One must also consider that there is a great number of frustrated investors who may regret Ripple trading at the most inopportune time and are just waiting to unload their investments once they reach a certain price target. The sell-off from previous holders is unlikely to outweigh the positive momentum from a positive lawsuit outcome.
The crypto market has been hit by global macro events such as the Ukraine invasion and US-Russian tensions which cause uncertainty around global supply chains and food and energy security. Investors have moved out of risky assets such as cryptocurrencies, hence the recent decline in Bitcoin prices. All cryptocurrencies are strongly correlated with the Bitcoin price movement and thus Ripple prices have also been in decline. At the current price and with expectations of a positive outcome mounting, now may be the best time to buy Ripple to take advantage of the potential price increase that may result.
How does Ripple stack up against Newcomers?
While Ripple was embroiled in the SEC lawsuit the rest of the crypto space did not waste time in catching up to Ripple’s technology. During the early 2010s before the 2017 crypto boom there were few competitors to Ripple’s lightning fast transactions and low costs. Since them however a number of projects now boast transaction speeds even greater than Ripple and at a lower cost. Should I buy Ripple if there are projects that offer superior service at a lower price? Let’s look into it.
Bitcoin settles approximately 7 transactions per second while Ethereum can do between 15 and 20 per second. It was thus a major milestone when Ripple came along and could manage 1,500 transactions per second at a fraction of the cost. Ripple’s greater competitors now are Solana and Luna. Solana boasts 65,000 per second and Luna 10,000 per second, both at neglible costs. Solana and Luna also have a lot of hype due to their recent price performance. Is it worth it to buy Ripple when these alternatives exist?
In the short term Ripple trading makes sense to take advantage of the short term price increase that may result from a positive trial outcome. As a long term investment it appears many institutional adopters are more interested in newer blockchains solutions with greater utility and arguably superior faster and cheaper technology. We can say that in the medium term Ripple is going nowhere as it is likely to be revitalized by the trial outcome and has a strong enough community to remain in use for a few more years. This may provide some crucial time to upgrade technology to compete with the new favorites.
How can I buy Ripple?
All cryptocurrencies can be purchased through either centralized or decentralized exchanges. By visiting coinmarketcap or coingecko you can find a summary of all the available cryptocurrencies and cryptocurrency custody solutions. With the means to buy the cold wallet crypto, you’ll also need a reliable and secure digital asset smart-card which is on offer here at Vaultavo. We also have state-of-the-art HSM crypto solutions to keep your digital assets safe.
Setting up one’s profile should be a quick process, taking somewhere between 10 to 15 minutes, make sure to have your ID on hand as this will be necessary for KYC (know your customer) and AML (anti money laundering) purposes. Once this process is complete and you have a verified account you can deposit your fiat money into the exchange at which point you are ready to buy Ripple.
When Ripple trading be sure to select whether you want to spot trade at the market price which will execute instantly at the lowest sell order currently available or otherwise you can set a limit order in which case you set the price at which you want to buy Ripple. The former method ensures that your order is executed near instantly but the price can fluctuate from what you might expect while the limit order ensures you get the price you expect but will not execute until there is a seller that can fill your buy Ripple order at the appropriate price.
Ripple was once a leader in the crypto space with cutting edge technology. Today, however, competitors such as Solana and Luna can process transactions faster and cheaper than Ripple which makes Ripple a less appealing investment prospect.
There are still two good reasons to buy Ripple and hold it on the Vaultavo platform. The SEC lawsuit may end soon which is likely to result in significant price increases and the Ripple community is strong and loyal which may give Ripple enough time to improve its technology.
Ripple Trading FAQs
Where can I buy Ripple?
Ripple is the name of the company that develops the cryptocurrency known as XRP. Therefore, if you want to buy Ripple you can go to any centralized exchange that is registered in your country or state and look for the ticker XRP. There are many legit centralized exchanges that still allow Ripple trading despite their lawsuit.
How can I safely store my Ripple?
Our team here at Vaultavo generally advises individuals not to store their crypto on centralized exchanges with are known to be vulnerable to attacks. If you buy Ripple on a centralized exchange you should protect your digital asset with cold storage devices, check out the Vaultavo Card for the safest and most convenient digital security.
Is now a good time for Ripple trading?
Great question. The answer will depend on the circumstances of the individual asking this question. If you have disposable income and are willing to risk it answer will be much different than for someone living paycheck to paycheck. Consider your personal finances and risk appetite before you buy Ripple. The Ripple price is much lower than its all time high price and its potential relisting on exchanges may result in price appreciation but always do your own research and consult before investing. The macro environment is uncertain with US-Russian tensions and the Ukrainian War which could negatively affect risk-on assets.