Maybe I am dating myself, but when I hear the word “Ripple,” I am reminded of the now-defunct brand of fortified wine that advertised itself as a favorite for “lively people.” Ripple Labs’ (CCC:XRP-USD) cryptocurrency has undoubtedly energized the market for digital money.
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XRP has been on the mother of all price runs — up nearly 500% since the start of the year — as investors bet that Ripple would beat a Securities and Exchange Commission (SEC) lawsuit filed last year accusing it of misleading investors. Several favorable court rulings and a committed “army” of backers on social media are powering demand for the token. It now ranks as the fourth most valuable cryptocurrency behind Bitcoin (CCC:BTC-USD), Ethereum (CCC:ETH-USD) and BinanceCoin (CCC:BNB-USD).
However, a reality check is in order. As I have argued previously, I don’t think Bitcoin and cryptocurrencies are scams, but I do think they are way too risky for most investors, including yours truly. XRP doesn’t seem any more or less risky than BTC, ETH and BNB, and it certainly has potential upside. Priced below $1.50, it sure is a heck of a lot cheaper compared with current prices of Bitcoin (near $54,000), Ethereum ($2,488) and BinanceCoin ($537).
However, don’t be lulled into a false sense of security by XRP’s bargain-basement price, because it is also quite volatile. Remember that XRP started 2020 at 20 cents, so the percentage gains are more dramatic than they would appear otherwise. Indeed, prices for XRP and other cryptocurrencies can move with no rhyme or reason, which is one of the reasons why I stay clear of them.
Ripple At a Glance
XRP is different than other forms of digital money. For one thing, unlike BTC, XRP doesn’t use blockchain technology. It runs on Ripple Protocol Technology. Furthermore, XRP is designed for international commerce, allowing for speedy currency exchange, payment settlements and remittances. The token’s biggest competitor is the SWIFT messaging system that banks and other financial institutions have used for decades. Bitcoin has loftier aims of replacing the world’s existing currencies.
Best I can tell, investors view XRP as an underdog story like GameStop (NYSE:GME) because it is going up against well-entrenched rivals and has faced its share of adversity.
The SEC filed suit in December against Ripple, accusing it of selling $1.3 billion in XRP tokens as illegal securities. It also took action against Ripple’s current Chief Executive Officer Brad Garlinghouse and former CEO Chris Larsen, accusing both of peddling XRP to unsuspecting investors though it had “little actual use.” As a result, many U.S. cryptocurrency exchanges, including Binance and Coinbase, halted XRP trading.
Since then, though, the government can’t catch a break.
Earlier this month, Judge Sarah Netburn allowed Ripple to gain access to the agency’s internal communications on how it determines whether a cryptocurrency is a security. Netburn also quashed a subpoena the agency issued for eight years of financial records from Garlinghouse and Larsen. For XRP’s many fans, this was the best possible news, and prices skyrocketed as a result.
The Bottom Line
Keep in mind that percentage gains appear more dramatic for smaller numbers. I have seen some pretty bullish predictions on Cryptopolian, saying XRP could reach $3 by 2023 and $17 by 2030. I could just as easily see XRP taking a nosedive given the unpredictable twists and turns of the crypto market.
Many of the numbers associated with XRP are mind-blowing.
According to Coinbase, XRP’s market capitalization is $60.9 billion. It exceeds the real gross domestic product (GDP) of some countries such as Latvia ($59 billion), El Salvador ($56 billion) and Syria ($50 billion), according to the CIA’s World Factbook.
How is that possible?
The bottom line on XRP is that it is the type of investment that could bring you riches or heartache. If you are willing to take the risk, go for it. Just don’t expect me to leave the sidelines anytime soon.
On the date of publication, Jonathan Berr is long Costco. He does not have (either directly or indirectly) any positions in the other securities mentioned in this article.
Jonathan Berr is an award-winning freelance journalist who has focused on business news since 1997. He’s luckier with his investments than his beloved yet underachieving Philadelphia sports teams.