Will Ripple Buck the Crypto Drop?
Bitcoin (BTC) is off today, trading at $3,579 more than 4% down since yesterday’s $3,741 close. Other major crypto coins have followed suit – Ethereum (ETH) is down 5.5% and Litecoin (LTC) is down 6.5% – and the crypto markets generally have lost over $5 billion from their total market cap in the last few hours. You can watch the rout in real-time at CoinWatch.com, if you are not faint of heart.
The sudden drop, after 9 days holding over $3,600, has investors and traders asking if this is the next step down for Bitcoin. In the eyes of many analysts, key point will be if BTC falls below $3,500 – that is seen as the main psychological barrier, and a sustained dip below that level will indicate further collapse to come. It’s a grim portent for a crypto market that’s been in bear territory for going on a year now.
One major player, however, has far less to worry about as the bottom falls out of the cryptocurrency trading market. In fact, in a bit of irony, a cryptocoin collapse may actually help.
Ripple Outperforms the Market
Ripple (XRP), while down 3% today, may actually benefit in the long run if cryptocoins fall. That’s because Ripple did not start as a cryptocurrency, and XRP, company’s altcoin trading unit, is not actually it’s most widely used product.
Ripple is a shortened name for the RippleNet, a blockchain based, cross border payment system, originally designed to facilitate international bank-to-bank payment transfers. The XRP altcoin was developed to store value on Ripple’s network, making it easier to track and log transactions. To this day, the Ripple company controls 60% or more of the XRP in existence, using it in the payment transfer aspects of the business.
The Hidden Strength of XRP
And now we get to Ripple’s most widely used product: xCurrent, a software product that connects Ripple with existing bank transfer infrastructure, making RippleNet’s speed accessible to the bank as a viable alternative to the SWIFT network. The advantage of Ripple here should be obvious, as the blockchain system can do in a few minutes what would take SWIFT several days.
Ripple’s control of the XRP token gives it an added strength as a challenger to SWIFT: XRP can be used to both facilitate currency transfers, and avoid the costs involved in currency exchanges. The sender can use US dollars to purchase XRP, which can be transferred rapidly to the receiver, who can convert the XRP to any desired currency – at that day’s rate, without the commissions usually involved. The only fees are Ripple’s, for the transfer service, and Ripple’s transaction costs are based on multiples of their minimum fee: 0.00001 XRP. About 0.00031 cents US, at today’s rate. That’s 31/100,000 of an American cent.
And Now a Word from the Experts
Ripple’s CEO, Brad Garlinghouse, makes a sales point of his company’s faster, cheaper cross-border transactions. “The average Swift transaction takes three days — but really what we're seeing is three business days. You're taking fiat volatility risk while markets are closed over the weekend,” he says, and describes cryptocurrency as a “bridge” between various national currencies. He says that large banks, like Citigroup, will his company’s last clients, as they have the largest vested interest in the current system.
While Ripple’s current customer list covers some 200 small to mis-size banks, they are widely distributed. The company’s global head of strategy, Marcus Treacher, focuses on a Ripple’s growth as a transfer system. “There is a lot of activity in the Middle East and in India, as you mentioned during the introduction, in Southeast Asia, and also in Latin America. We see a lot of growth as well in Northern Europe. So there is really a nice global coverage that is building very quickly.”
So, will blockchain based cryptocurrencies collapse completely? I don’t know. Bitcoin is still above $3,500 today, and Ethereum is at $116. Ripple’s XRP, used an altcoin, has declined less than the crypto market generally. But there’s no doubt that crypto currencies are truly in a bear market, and that traders are getting nervous. A token with an added benefit is likely to show surprising strength when – or if – the bottom does fall out.
Author: Michael Marcus
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.