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- The price of Ripple’s XRP gained as much as 70% in hugely volatile trade on Tuesday, extending the broader cryptocurrency rally led by Bitcoin.
- As institutional investors allocate massive amounts to Bitcoin as a hedge against inflation, other market participants are looking to alternative cryptocurrencies — or altcoins.
- Ripple designed XRP to perform speedy, less costly, and more scalable alternative transactions.
- The token’s latest rally is also being driven by a central bank push to digitalize currencies.
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Ripple’s XRP surged as much as 70% on Tuesday as the third-biggest cryptocurrency extended a rally that has been kickstarted by mass interest in Bitcoin.
Ripple’s price has risen about four-fold since the start of the pandemic, making gains alongside Bitcoin — which rose 4% to a near all-time high of $19,241 on Tuesday.
“XRP has been a speculative investment for a long time,” said Michael Anderson, co-founder of DeFi venture capitalist Framework Ventures. “There have been many partnerships announced but few practical applications.”
The top cryptocurrencies have gained price momentum over the last week. Ethereum has gained 30% and Bitcoin by 8%, but XRP has led the way with a 70% jump. Bitcoin’s rally this year has been partly driven by its touted status as an inflation hedge, which in turn could be spreading to other cryptocurrencies.
Investors pouring into Bitcoin, Ethereum, Ripple and other cryptos are looking to capitalize on a central bank rush to digitalize currencies, specifically the European Commission. ECB president Christine Lagarde has previously said the bank is seriously considering a digital euro.
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The name “Ripple” plays a dual role as both a payments exchange and a currency. Ripple designed XRP with the chief aim to perform speedy, inexpensive, and more scalable alternative transactions that make it “extremely useful” for payments.
Ethereum, the second-largest cryptocurrency by market capitalization, has risen above $600 this week to a two-year high head of a major update to its network to address scalability and security. The platform’s network upgrade will usher in new decentralized finance products that create high-demand alternatives to traditional finance, which explains the rapid increases in valuation, Anderson said.
As for Bitcoin, any rush past $20,000 and profit-taking that comes after “isn’t a bad thing, it is healthy for the market to push on further,” according to Rich Rosenblum, head of trading at crypto market maker GSR.
“It will clear the way for more investors with long-term outlooks to enter for the first time, and for existing holders to add to their allocations. There is still a lot of capacity among retail and institutional investors, this price action is arguably the first step of a bull market that is ready for new levels of capital not seen in digital assets,” Rosenblum said.