The recent rally of the Ripple cryptocurrency XRP cooled a bit from November’s surge, but the price seems to be trying to top the 60-cent mark.
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This creates a small dilemma for potential investors.
Those who bought in when the price was lower may be tempted to sell and take some profits just prior to the Christmas holiday – especially since the cryptocurrency reached the 70s not too long ago. Or, is the long view more in order? Will XRP regain momentum and head north once again?
Ripple Is Different
With its comparatively low-cost, XRP is attractive to investors considering the cryptocurrency space. That low cost also allows for significant profits when the price climbs, as seen last month.
Obviously, the reverse is true when the price declines and holders flirt with notable losses if they get uptight and sell out.
This means that XRP doesn’t have to move a great distance for the change to have a great impact – either good or bad. For example, a swing from 50 cents to 75 cents, will produce meaningful profit for that someone who made that $1,000 investment writers like to cite. Meanwhile, investors in Bitcoin (CCC:BTC) would hardly raise an eyebrow if it posted a 25-cent increase.
In other words, XRP is much more accessible. And, it is much more volatile in even small variations.
By the Numbers
Here’s some background. XRP is lumped into the cryptocurrency group altcoin, with the prefix setting it apart from Bitcoin. It is the third-largest cryptocurrency, according to market value.
Ripple is a networking company that uses blockchain technology to transfer funds. XRP is the company’s cryptocurrency. RippleNet is touted as a faster and reliable settlement system and currency exchange. The company says its customer list includes American Express (NYSE:AXP), PNC Bank (NYSE:PNC) and Moneygram (NASDAQ:MGI). Ripple invested in Moneygram in 2019 and is in the process of selling a portion of its shares to capture profit.
During the last year, the price of XRP has ranged from a low of 11 cents to a high of nearly 77 cents.
In comparison, Bitcoin recently reached $22,000. 14. Ethereum is at $645. And XRP is just under 60 cents.
While history will remember 2020 for several negatives, it was good for XRP. It began the year at about 19 cents and was about a quarter at the beginning of November. The cryptocurrency then began an upward trek and reached a two-year high. On Nov. 24, XRP reached 73 cents.
Bitcoin, meanwhile, began the year at about $7,000.
The Bottom Line on Ripple and XRP
Ripple and XRP, its cryptocurrency, offers an affordable avenue for investors interested in the “coin” space. It is much cheaper than the original, Bitcoin. But XRP’s lower price does not mean it is any less volatile. Cryptocurrency is, by its very nature, quite volatile. Because of its lower price, even a small change in XRP can leave a mark.
David Moadel, a colleague at InvestorPlace, recently described Ripple as being popular with institutions and banks. On Dec. 2, he wrote that “institutions appear to be increasingly accepting cryptocurrency as a legitimate store of value and means of monetary transaction.”
Now that XRP retreated from the highs posted in November, investors looking to buy at the lower prices have to guess whether now is the time to act.
Fifty cents has been cited by observers as a key trigger price for XRP to either begin a stake or add to an investor’s holdings. How long XRP will remain at this level is anyone’s guess.
In his article, Moadel offers good advice:
“As cautious crypto investors, we must always keep in mind that volatility is normal and position sizes should be moderate.”
Investing in cryptocurrency is for the brave, not the squeamish. However, for investors willing to go there, a small to moderate position of XRP would be accessible and could help diversify a portfolio.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.