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Why is Ripple so cheap?

why is ripple so cheap

February 17, 2021 | 

JOHN K MWANIKI |  0 Comments| 

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According to CoinMarketCap, Ripple is the fifth-largest cryptocurrency by market cap. Many financial institutions use this digital currency to provide fast, secure, and cheap transactions to their users. Unlike bitcoin and other cryptocurrencies, Ripple is a centralized platform. It is also directly interlinked with the financial community. As a result, many investors and traders are looking to invest in it.

As one of the oldest cryptocurrencies in the market, Ripple's price is yet to skyrocket. Ripple has successfully created partnerships with key players in the global financial sector. But, its price fails to increase. In this article, we will look at some reasons behind why is Ripple so cheap.

What is keeping Ripple so cheap?

Since its start in 2012, Ripple has been making huge headlines on the blockchain platform. Many financial institutions have embraced its technology to perform instant cross-border payments. Ripple has over 200 partnerships with banks and other financial institutions. Some of these partnerships are with MoneyGram, Axis Bank, MUFG Bank, SBI Holdings, Bank of Thailand, Barclays, Standard Chartered Bank, and many others.

Despite all its partnerships and new developments, Ripple still fails to surpass its initial $3.84 mark. Reasons behind why is Ripple so cheap include:

1. It is a centralized cryptocurrency

Unlike other cryptocurrencies available in the market, Ripple is a centralized crypto. Ripple Labs own the majority of its shares and control Ripple's value. As a result, they can easily manipulate it to ensure its stability and success. The company also releases 1 billion XRP, Ripple's Currency, from Escrow monthly. This allows the company to make new investments and stabilize the market's ecosystem. But, it is common for XRP's price to drop during this inflow of new coins.

Bitcoin is one of the decentralized cryptocurrencies available in the market. No one controls it, and it does not have backing from a specific group of people. As a result, it can easily be subject to a major attack. Luckily, this is almost impossible due to its unique blockchain system. 

2. Ripple's huge circulating supply

Contrary to popular belief, the price of any digital token does not correlate to its total value. The price of a particular cryptocurrency going up or down determines its market value. However, the actual market value is only evaluated in terms of market capitalization

Market capitalization is the multiplication of the current market value by the circulating supply (total amount of tokens in circulation). Often, a higher token value does not necessarily translate into a more expensive cryptocurrency.

When it comes to XRP, the current trading price is $0.5215. Its current circulating supply is about 45 billion tokens, according to Coindesk. Thus, the project's total market capitalization is $22.96 billion. Let us compare this to Cardano, the fourth-ranking cryptocurrency. It has a token price of $0.93 and a circulating supply of approximately 31 billion tokens, lower than that of XRP. Thus, due to XRP's huge circulating supply, its tokens' price is lower than that of most of its competitors. 

3. Is Ripple so cheap because it is awaiting government regulations?

The cryptocurrency industry has been waiting for government regulations and guidelines. Ripple is the only cryptocurrency pushing for these regulations. This is because it is more likely to adapt to them easily than bitcoin and other cryptos. 

Once there is market clarity and strict regulations to protect the investor's interests, Ripple's demand and price will skyrocket. This is because its main product, xCurrent, seeks to ease existing regulatory initiatives. Likewise, regulating cryptocurrencies will also increase their chances of mainstream adoption. In turn, this will lead to increased valuation of the cryptocurrency markets.

4. Its pending lawsuit by the U.S Securities and Exchange Commission (SEC)

Another reason why is Ripple so cheap is because of the lawsuit leveled against Ripple by SEC. According to the Commission, Ripple has been violating federal securities laws by selling XRP cryptocurrency to retail consumers. SEC claims that Ripple has raised over $1.3 billion in seven years by selling XRP on an ongoing basis. But, Ripple presented a defense to SEC, responding to why certain activities did not violate U.S Securities Laws.

Due to this ongoing case, about 15 cryptocurrency exchanges have delisted or suspended XRP trading. However, most of them have simply suspended XRP trading activity in the U.S. Others have entirely suspended it, both locally and internationally. 

If SEC's lawsuit against Ripple Inc. prevails, XRP's market could quickly dry up, causing the prices to suffer. Similarly, cryptocurrency exchanges that continue to list XRP/Ripple risk being asked to register as securities exchanges by SEC. They also risk facing massive penalties for allowing the trade of an unregistered security.

In terms of market value, the ongoing lawsuit has caused Ripple's price to drop significantly compared to its previous market performance. Upon the SEC filing the suit, its price dropped instantly by 14%, before rebounding slightly when Ripple filed its defense. According to many market experts, the ongoing case may take years to finalize. As a result, this could cause adverse effects on the crypto market as a whole.

If XRP ends up being a security, there will be a significant disappearance of market liquidity. This will cause investors and traders to dump heavily in price. Most people tend to avoid the complexity and cost of interacting and owning a security instrument. In turn, this is the reason behind why is Ripple so cheap as of late.

Conclusion

If you are wondering why is Ripple so cheap, the reasons mentioned above should give you the answer. Despite its low price, many people are taking advantage of this opportunity to invest in Ripple. Many big players in the financial industry are still using the digital currency to perform international transactions. As a result, there is immense potential for Ripple's price to rise and even reach the $1 mark by the end of 2021.

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