We're only three weeks into 2018 and it's already been a particularly wild year for cryptocurrency investors. And that's saying something for a market where 15% moves are brushed off as daily trading swings.
The euphoric first week of January, when a number of coins achieved all-time highs and bitcoin reached for its own stratospheric peak, was met with a downturn that slid from disappointing to catastrophic over the next two weeks. Prices dipped to lows not seen since the mainstream media picked up on cryptocurrencies last fall, with bitcoin crashing under the critical $10,000 mark on Jan 16.
Was it big-money investors shorting the market to cash in on futures contracts? A selloff in preparation of tax season or the Chinese New Year? The classic January crypto-dip ? We may never know for sure. But whatever plagued the market has made a swift exit.
At the time of writing, bitcoin had rallied over 20% in less than a day, and the other two most well-known cryptos, ether and litecoin, had gained even more. But some of the greatest gains were in a couple of "altcoins" (coins other than bitcoin) you may or may not have heard of.
The Media Darling
The crypto rally that kicked off 2018 was big for most of the market, but one coin in particular finally caught the eye of the media after notching early-bitcoin-level gains between December and January.
Ripple (XRP) is a cryptocurrency designed to facilitate transactions, like bank transfers and international payments. The company behind it, also called Ripple, hopes to forge partnerships with banks (as well as payment providers and individuals), giving them a faster, more secure method for carrying out large numbers of transactions.
While this approach flies in the face of the traditional crypto mission of securing wealth away from large corporations and governments, Ripple has achieved incredible success so far. The company has partnered with over 100 customers, with more than 75 deploying its services commercially. These include large banks like Santander and UBS, as well as payment processor MoneyGram.
Even more impressive and promising are the companies and entities backing Ripple. Investors include Seagate Technology (Nasdaq: STX ) and Accenture (NYSE: ACN ), as well as influential venture capital firms Andreessen Horowitz (Twitter, Skype, Airbnb) and Lightspeed Venture Partners (Snapchat).
And the markets seem to be catching on. Ripple hovered around $0.20 for much of the fall of 2017 before exploding to a peak of close to $4.00 by early January, briefly overtaking ethereum as the second-largest cryptocurrency by market cap.
After falling to a low near $0.85 again on January 17, ripple has led the market in the ensuing relief rally, once again soaring 100% to a high of $1.70 at the time of writing.
So the question on everyone's mind is: How far can it go? In theory, it could hit double-digits, particularly if it achieves widespread adoption among banks. For a conservative estimate, though, let's look at the crypto market. If it catches up to ether in market cap, this would mean a 67% gain for a price around $2.67. If it catches bitcoin at its current level, it would be double that, around $5. But given the expected growth of the overall market in 2018, I wouldn't be shocked if ripple hit $10 before the year is out, even if only briefly.
At this point though, ripple is limited by its size. A market cap of $60 billion can only grow so much. But there's another coin that could be catching up, and it's less than a sixth the size.
Stellar is a value-transfer network that functions similarly to Ripple. Complex technical details aside, Stellar is just as fast and cheaper to use than its competitor-- Stellar's fee is typically less than a third of the fee charged by the Ripple network for a similar transaction. And with a seed investment from payment giant Stripe and a partnership with IBM , Stellar is rapidly rising through the crypto ranks.
Lumens (XLM) , the coins traded on the Stellar network, have seen their value increase at roughly the same speed as ripple since the latest crash. Where lumens were trading for as little as a quarter on January 17, the price has since rebounded to $0.50, with no signs of a correction.
With a market cap of just under $10 billion, Stellar is poised to capture a larger share of its market as we move into 2018. And the gains in lumens will likely keep pace. Think about it: If Stellar catches up to ripple's present market cap, we'd be looking at a 600% gain to a level of about $3.50. And in an increasingly crowded crypto market, that's something to strive for.
Risks To Consider: The crypto market is the Wild West -- bandits, government regulators, or market crashes could take away your digital gold at any time (I'm only half-kidding). Don't invest any capital you're not afraid to lose entirely.
Action To Take: Buy ripple and/or stellar and hold for the long term. As new partnerships come to fruition and the market recovers, look for significant price moves in these two market leaders.
As for the actual purchase, your best option is to buy ether or bitcoin on Coinbase and then exchange them to ripple or lumens on a crypto exchange that supports these currencies (list here for ripple and here for lumens). You can also buy ripple directly through Kraken , which is similar to Coinbase. Check out Ripple's site for more info.
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