11 January 2021 • 9 min read
Ripple, or XRP, remains one of the most undervalued crypto assets in the world.
While it consistently holds the third position in the crypto pantheon behind Ethereum (stablecoins excluded), XRP has not been able to take advantage of investor interest in crypto as the market has recovered over the past two years.
While XRP offers features that are unique in the crypto marketplace, there appears to be heavy selling pressure above the $0.30 level. It is difficult to explain this, however Ripple uses a non-traditional platform model that may not be attractive to many existing crypto investors.
XRP is a payment token that was created by Ripple Labs to be used on its decentralized payments system. While the company started off with a blockchain-based system, XRP is used with a network of validation nodes, not a blockchain.
The Ripple network can be used for more than just sending XRP and although the token is limited in supply, it isn't mined in the same way that Bitcoin or Ethereum is. This is an advantage in terms of speed and cost, but it may not appeal to Bitcoin PoW purists.
The price of XRP has lagged the performance of many tokens, regardless of their market cap. After XRP's initial rally to $3.40 in early 2018, shortly after being introduced to the public, it has failed to participate in the price appreciation that both Bitcoin and Ethereum have enjoyed as crypto markets recover.
While XRP's price has bounced from its bear market lows below $0.15, the token has struggled to eclipse the $0.30 level on a meaningful basis as other tokens reclaimed far more lost ground. Although Ripple's platform does allow for some DeFi applications, XRP has been totally ignored as DeFi tokens with far less to offer in terms of substance appreciated substantially in 2020.
XRP prices do appear to move in-line with the rest of the crypto markets and when Bitcoin moves, XRP seems to go in the same direction when measured on a weekly or monthly basis. The token has little in the way of a predictive value for the crypto markets and XRP's price action appears to be driven by overall market liquidity and direction.
The 'roof' that exists in the XRP market is very difficult to explain on a fundamental basis. From a technical perspective, it is simple to see this market dynamic, but given the progress that Ripple has made over the past year, this selling level is clearly a technical consideration.
News flow and company achievements seem to have a very limited impact on how the price of XRP moves. The biggest influence on the price of XRP appears to be the overall crypto market sentiment and also financial market liquidity conditions.
One example of this is Ripple's decision to introduce a commercial XRP lending program that would help companies that use the platform to expand their trade financing operations via XRP loans. There are few other offers like this in the marketplace, but the news did nothing to move XRPs price in a significant way.
In fact, it is difficult to find any correlation between XRP-based news flow and prices, regardless of whether the news is positive or negative.
Ripple traders appear to be more interested in the overall direction of the crypto markets. Bitcoin prices lead XRP movements, although XRP appears to have long-term selling pressure, as it has traded under the $0.30 level for well over a year, with few exceptions.
Given the fact that Ripple has an established global presence and banks have been working with the platform for many years, the outlook for further XRP development is good. The price action that may result from ongoing Ripple/XRP support is a more nuanced question.
It is highly likely that crypto market sentiment will remain positive until at least 2025, which is clearly helpful for XRP prices. New users coming into the crypto space may not care that XRP isn't decentralized in the way that Bitcoin is and users may also like that XRP transactions are extremely fast.
While in its early stages, the commercial financing platform that Ripple has created could also be a huge price driver, as global cross-border cash flows are enormous. The company has dedicated XRP tokens for this financing platform, which creates the potential for a virtuous cycle that leads to further price appreciation.
The $0.30 level remains critical to watch from a technical perspective, as any meaningful breach of this level could lead to rapid price appreciation. There is little to support a bear case for XRP prices, given the fact that it has traced out multiple bottoms over the past 18 months.
It isn't difficult to see that XRP prices have created a triple bottom on a longer-term chart, with the lowest point printing in March of 2020, creating a textbook inverse head-and-shoulders pattern.
A break above $0.30 would confirm this ultra-bullish pattern, which would suggest a long-term bull run for XRP. Due to the size of the pattern, it may signal an XRP bull market for many years to come, but so far, XRP prices remain below the critical $0.30 level.
If commercial lending activities lead to higher XRP prices, Ripple would have more capital to lend from a fiat standpoint. These higher token prices may encourage borrowers or other investors to buy or hold the token, which further helps XRP prices as they would not be sold immediately after the need for the capital was fulfilled.
XRP can also be staked, which may appeal to commercial interests that can part their XRP and earn interest on it when they aren't using it for trade settlement, which isn't possible with fiat currency at the moment. This would lead to higher demand for XRP, as it would be seen as both a way to generate yield and also settle transactions globally.
It would be reasonable to speculate that XRP could achieve the $1.00 level over the next four years and if the industry adopts it as a clearance and savings token, the price may go much higher.
One major hurdle that Ripple is preparing to overcome is the lack of US regulations and ongoing issues over the legal status of XRP. According to an interview that Ripple CEO Brad Garlinghouse gave to Fortune in October of 2020, Ripple may be leaving the USA due to the lack of cohesive regulations for the crypto industry.
Ripple's primary market for its non-XRP products is Asia and especially Japan.
If Ripple chooses to move its operations to Asia, it may find that both Ripple products and XRP find more support. Both Japan and Singapore have been cited as possible locations for Ripple's new headquarters and both nations would likely help Ripple expand its scope of operations.
Ripple has been active in the Japanese financial services industry for many years via its subsidiary, SBI Ripple Asia. It first created a domestic payments platform with a consortium of 15 Japanese banks in 2016 and more recently, its co-owned MoneyTap app was expanded to play an even greater role in the Japanese payment app market.
For the moment, these systems don't actually use XRP, but the Japanese are free to buy and use XRP if they like. Ripple has built up a positive image for itself in one of the most advanced global economies, which could be very positive in the future.
Clearly, any net buying of XRP would be positive for the price. If Asian banks, companies and consumers begin using XRP as a solution for cross-border finance, settlement and domestic payments, the move up in XRP prices could be dramatic.
XRP has also entered the staking boom via Bitrue. The staking marketplace offers an annual yield of above 5% on staked XRP at the time of writing, which may be attractive to commercial clients who can't make any interest on major fiat currencies at the moment.
With more commercial and institutional investors entering the crypto space, these interest rates that are orders of magnitude higher than what is on offer in the fiat world and may help XRP overcome whatever is holding it back currently.
Established investors are far less likely to care about the kind of validation system that XRP uses and will be more inclined to use a token that has a company behind it, offers good returns in the form of interest payments and also features rock-bottom transaction prices.
There is no doubt that XRP is well placed to participate in crypto markets going forward, but if this will lead to immediate price rises is far less certain. As mentioned above, XRP prices haven't recovered from the crypto bear market at the same rate as other popular tokens and this may continue.
Does this mean that XRP is a buy today? That all depends on what your investment goals are.
For investors that want to diversify their crypto holdings away from Bitcoin and Ethereum, XRP offers unique features that may become more appealing to crypto buyers in the coming year. It would be a good idea to have reasonable expectations about what XRP prices are likely to do in the near-term and not expect massive price gains over a short period of time.
The longer-term story for XRP is likely to be more positive. Ripple has been able to expand its operations globally and create innovative new products, even while the crypto markets suffered from a lack of investor interest.
One of the biggest questions is whether or not investors will see XRP as a DeFi token in the coming years, as the platform offers many of the same advantages that DeFi startup tokens do and it has an established track record to pull from. XRP can also be staked, which may become more important over the coming years.
Central banks are stuck at zero and higher interest rates aren't likely to come to the fiat markets any time soon. As a token that can be staked, XRP offers both a great yield in fiat terms and also the security of being managed by a company that has shown itself to be completely reliable.
While XRP tokens haven't recovered at the same rate that many other tokens have, the possibility of an upside surprise remains. Ripple has struggled as a result of its decision to be a US-based company and moving outside of the USA may increase its development options and also remove any further risks of securities-related lawsuits.
XRP is probably better to think about as a long-term investment in crypto adoption, rather than a short-lived trade that will create double-digit trading profits. The company behind XRP has shown steady progress in building a viable system for both crypto and fiat users and has a stellar reputation in many Asian nations.
Going forward, Ripple’s slow and steady approach is likely to yield positive results not only for the company but XRP holders as well. Find out more of our picks for the best cryptocurrency investments in this article right here.
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Disclaimer: None of what is found in this article should be considered investment advice. Much of the above analysis is based on already-released news, expected future developments and pure speculation. While we can analyse what we have seen in the past, we can not predict the future. This article also may become out of date at some point and fail to reflect current, updated prices and information. Always do your own research before investing and always (!) only invest what you can afford to lose!