Ripple (XRP)–Earlier this week Ripple broke waves in the cryptosphere with the announcement that MoneyGram, a U.S. based money transfer service operating in over 200 countries, would be using XRP in a pilot program to test the efficacy of the burgeoning cryptocurrency. However, the news seemed to have little effect on the price, and did not create the massive stir investors would have expected given the gravity of the partnership.
So what is the true impact of the MoneyGram announcement on the overall value of XRP?
Subtle Price Increase
More than a few Ripple holders are confused by the lack of significant price movement in XRP following such a momentous announcement. Not only did Ripple fail to achieve anywhere close to its all time high of 3.80 USD, but the price has actually managed a steady erosion back to levels preceding the positive news.
Just looking at the chart does not tell the full story. The price of ripple did shoot up following the announcement. Hovering close to 1.70 USD, XRP jumped almost 25% in the 30 minutes following the news to 2.25 USD. The price then stagnated for a variety of reasons. The first is investors who had bought in at an earlier all time high were looking to get out of XRP at the top of what appeared to be just another pump and dump. The second, and more frustrating cause of the stalling price was from market manipulators looking to capitalize on the news. Savvy traders bought XRP immediately following the MoneyGram news drop with the intention to dump it off on the flood of new investors. This selloff created steady downward pressure on the price and all but stalled the positive price momentum from the MoneyGram announcement. Profit-taking in this manner is normal in any investment. Unless you are a daytrader attempting to capitalize on the market, you can expect the price of Ripple to bounce back in price at some point, even if this bear market feels difficult to weather.
While the price of XRP failed to moon in the way some investors were hoping, keep in mind that big news like the MoneyGram announcement becomes “baked” into the price of Ripple. Investors, especially those building long positions, know what is at stake in the currency. XRP is generating real-world use cases and developing a presence in the public eye, the media and, most importantly, the world of financial technology. It’s hard to shake the excitement and interest even if the short term price movements don’t adequately reflect it.
We also have to consider the consequence of being tied to BTC pairings on all exchanges. As the price of BTC drops, the price of Ripple also falls, even if the satoshi amount is less significant. Think of it this way: almost all money in crypto is first filtered through Bitcoin. This is especially true for altcoins and the majority of exchanges where fiat pairings are not available. That means people must consider their investments not only in terms of fiat amount, but also Bitcoin. When the price of BTC recedes, and the subsequent market price erosion occurs, those 21 million Bitcoins begin to look like a safer investment, if only for the reason that it can more quickly be cashed out. It also provides investors flexibility. Instead of tying up money in Ripple, which is falling in price, they can hold a reserve of BTC that can then be used to buy back into XRP or other alts when the time becomes favorable. Again, this process highlights the need for more exchanges with direct fiat pairing, or pairings outside of strictly BTC (and ETH to a lesser extent). So while the price of XRP may be on a steady downturn, the intrinsic price is difficult to judge given the bear-market conditions.
Greater Exposure Helps All Cryptocurrency
If nothing else, the MoneyGram announcement accomplishes two significant features:
- Greater exposure. Ripple is now on the radar of major media outlets, financial focused newsletters and importantly, banking executives that are being targeted for XRP use. This not only benefits Ripple, but all of cryptocurrency in the long run. The more exposure cryptocurrency gets, particularly in representing real world use and technical problem solving, the more validated the technology becomes.
- Tangible functionality. Tying into the previous point, XRP is now pushing into the financial technology world in a way that can’t be ignored. Banks and all for-profit entities are constantly in search of technology that will give them a leg up on the market. If Ripple delivers on the promise of security and ease-of-use to coincide with its known cost and time-saving utility, it is difficult to imagine how more financial services won’t at least be willing to give the technology a try.
Ripple CEO Brad Garlinghouse has already stated that more major players in the field of money transfer will be piloting XRP in 2018. That news preceded the MoneyGram announcement, giving investors planning to go long on Ripple relative assurance that several more big players will follow suit. If MoneyGram becomes just the first of several announcements this month, it’s not hard to imagine the domino effect as more banks and money transfer companies scramble to get on board with their competitors. XRP has long exhibited an accumulation phase preceding massive exponential gains. While the price is not quite living up to the value established by Ripple, each announcement of real world use and integration in financial technology creates a stronger springboard for XRP to leap off of.
Expect good things to come from Ripple in 2018.