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According to CoinMarketCap, Ripple is the fifth-largest cryptocurrency by market capitalisation. Many financial institutions use this digital currency to provide fast, secure and cheap transactions for their users. Unlike Bitcoin and other cryptocurrencies, Ripple is a centralised platform. It is also directly linked to the financial world. Therefore, many investors and traders are interested in investing in Ripple.

As one of the oldest cryptocurrencies on the market, the price of Ripple has not yet skyrocketed. Ripple has successfully partnered with major players in the global financial sector. But its price is not going up. In this article, we will look at some reasons why Ripple is so cheap.

Why is 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 the partnerships and new developments, Ripple still fails to surpass the original $3.84 mark. The reasons why Ripple is so cheap include:

1. It is a centralized cryptocurrency

Unlike other cryptocurrencies available in the market, Ripple is 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 the 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 levelled 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 defence 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. succeeds, the market for XRP could dry up quickly and prices could suffer. Similarly, cryptocurrency exchanges that continue to list XRP/Ripple risk are being asked by SEC to register as securities exchanges. They also risk massive penalties if they allow trading in unregistered securities.

In terms of market value, the ongoing lawsuit has caused Ripple's price to drop significantly compared to its previous market performance. When SEC filed the lawsuit, the price immediately fell by 14% before recovering slightly when Ripple filed its defence. According to many market experts, it could take years to settle the case. This could have a detrimental effect on the entire crypto market.

If XRP ends up being classified as a security, market liquidity will drop significantly. As a result, investors and traders will lose a lot of value. Most people tend to avoid the complexities and costs associated with interacting and holding the security. This in turn is why Ripple has been so cheap recently.

Conclusion

If you are still wondering why Ripple is so cheap, the above reasons should give you the answer. Despite the low price, many people are taking the opportunity to invest in Ripple. Many big players in the financial industry still use digital currency for international transactions. Therefore, 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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