Note 3/30: XRP Spike

Ripple’s XRP has had a roller coaster ride in crypto markets.

At the beginning of 2018, it was the crypto world’s third most valuable digital asset. Growing adoption of Ripple’s cross border payments platform, in which XRP is used as a bridge currency between two fiat currencies, was cited as a reason for investor enthusiasm for the token. But the tides quickly turned for the token.

New coins emerged as competition. Critics said XRP was a grift, another way to make money for Ripple, and was not necessary to conduct transfers. The Securities and Exchange Commission (SEC) filed a case against the company, alleging that XRP was an unregistered security. The growing list of controversies surrounding the cryptocurrency led to a years-long decline in its price and it fell out of the top ten traded digital currencies in crypto markets.

A False Rally

The token is back in the news this week. Its price has rallied by almost 30%, reaching a peak of $0.576 yesterday evening. On a monthly basis, that figure is an even more impressive 54%. As of this writing, it is changing hands at $0.54, roughly unchanged from its price a day earlier. It has a market capitalization of almost $28 billion and is the sixth biggest crypto right now.

What caused the rally?

It is hard to tell. A possible reason being offered as explanation is the reference to bitcoin and ether as commodities in the CFTC’s lawsuit against Binance earlier this week. Those references could boost Ripple’s assertion that XRP is a commodity, the thinking goes.

But the suit does not mention XRP in a list of tokens that includes Bitcoin, Ether, Litecoin “and, at least, two fiat-backed stablecoins tether (USDT) and the Binance USD (BUSD)” as commodities.  

A Time for Profits

XRP could sneak into that list. But the chances are slim to non-existent.

XRP was pre-mined and distributed to select stakeholders on inception. In a previous message board positing, Ripple CTO David Schwartz is also reported to have said that the company is committed “to maximizing shareholder value” for XRP holders. The token is also neither decentralized nor permissionless, two false claims made on its website, because its network was designed by and depends on the efforts of Ripple, its parent company.

The use cases for XRP outlined on its website – pre-funding money transfers or as a mechanism to implement central bank digital currencies (CBDC) – have already become possible without its use due to developments in digital currencies. Pre-funding money transfers with a worthless token should not be necessary when a digital equivalent of fiat is available.

But speculation does not listen to reason. Especially, when there are profits to be made from trading a worthless token.

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