Ripple (XRP)–Ripple, the currency of choice for banks and financial institutions, has had a strong couple of months. Up from 0.25 USD at the start of December, XRP pricing has reached as high as 3.80, constituting an increase of 1400%. While the market capitalization for Ripple has settled in the ~60 billion USD range, at one point Ripple held second place in market share and appeared to be a serious contender for Bitcoin’s top spot. Last year was only the beginning of Ripple’s rise. Adoption of XRP is building, and we are seeing the conditions for more exponential increases throughout 2018.
Here are just a few reasons why a trillion dollar market cap for Ripple is within sight:
Bitcoin Stagnates, Ripple on the Rise
MIT was one of the first institutions to report on the waning dominance of Bitcoin in the marketplace (previously around 55%, now hovering in the 30s) and that BTC’s share would decline over the coming years with the rise and interest of altcoins. Ethereum has thus far been the poster child in terms of market cap (currently 110 billion USD, or 18% of market share). Ripple has also been on the rise since December, leaping from 4% of total market cap to above 9%. We had previously reported that one of Ripple’s goals for 2018 is overcoming ETH for the second highest market capitalization. However, if XRP continues its present rate of adoption in the financial services world, with MoneyGram just being the first of several large companies to endorse the currency, it’s not hard to imagine Ripple overtaking Bitcoin for the top spot.
Rising Tide of Cryptocurrency
The entire market of cryptocurrency rose from $17 billion at the start of 2017, to an all time high of $830 billion at the beginning of 2018. Barring total meltdown, it’s not even a bullish statement at this point to say that cryptocurrency will reach a trillion dollar market capitalization in the first half of 2018. From there, the market could head in a direction few predicted a year ago. Bitcoin has been a flagship for cryptocurrency, both in terms of profit and the excitement of a truly digital, decentralized currency. However, Bitcoin must also contend with the rise of other currencies (labelled altcoins in deferential treatment to BTC’s founder status), that are specifically targeting real world needs. Ripple is positioning itself as a cheaper, more efficient method for bank-to-bank transactions, which constitutes a 150 trillion dollar market. In terms of dollar-for-dollar disruption, Ripple is going after an even bigger market than Bitcoin, which is theoretically a replacement for government fiat. Bitcoin, whether in the form of Core, Cash or some looming hard-fork, will always hold a concentrated amount of the wealth in crypto. It benefits from a strong media image, tantalizing speculation and a utility that combines revolutionary political and economic ideals.
But Ripple is going after the banks. And, what’s more, XRP is finding ways to grow outside of bank-to-bank transactions. We are seeing the direct benefit of open-source, decentralized currencies in a global marketplace: you can adapt them to fit your needs. Amazon could decide to adopt XRP tomorrow as its native cryptocurrency over Bitcoin or Litecoin. Facebook could do the same. Or Twitter, or any other platform with the possibility of implementing digital commerce. More hedge funds could follow Michael Arrington in creating an investment vehicle that is fluid, fast and cheap, giving Ripple the image of the “safe” currency to transact crypto with.
Then of course, is the commerce that XRP end-users create. There is $55 billion held up in Ripple right now, not all of which belongs to institutional money. End-users have the possibility of creating utility in XRP just like banks, hedge funds and centers of commerce. Small business owners, internet entrepreneurs, really anyone involved in a process of exchange can start accepting XRP as a form of payment. So long as transaction speed stays high and fees are low, Ripple offers a legitimate alternative to other forms of payment. Customers in developed countries may not see the value of paying in XRP when credit and debit cards are ubiquitous, but there are people across the globe that could benefit from having cheap and convenient digital currency. There’s no barrier to XRP being used as a means of small-cap exchange just because Ripple the company is targeting the banking industry. Commerce is what the market creates and the medium of exchange is just a solution of utility. If XRP offers speed, security and negligible fees, along with a stable currency, its potential is only limited by imagination.
MoneyGram, Western Union, and Domino-Effect Adoption
Brad Garlinghouse, CEO of Ripple, announced at the beginning of the year that 3 of the top 5 money transfer companies in the world would be starting a pilot program with XRP. That announcement predated the partnership of MoneyGram, giving ample evidence to believe that two more companies are waiting to announce their partnership. Western Union has been pegged as a favorite, but the real value in these partnerships is the domino-effect they create in further adoption. The financial services world, including big banks like Goldman Sachs and JP Morgan, operate by finding the next advantage to give them an edge on the market. Stagnation in the world of money is a death sentence. We saw it in the 2000s with the rise of HFTs (high frequency trading), that put traditional stock-brokers to shame. Ripple is more than just a small stepping stone. It offers secure, fast, and essentially free transactions from anywhere in the world (a claim that has recently been verified by Cuallix).
Here’s the thing: what do these companies have to lose by adopting Ripple? The market has already responded to the excitement of XRP implementation with rising stock prices in money transfer companies. The MoneyGram announcement is a pilot program. If XRP doesn’t work as expected, they can continue on with their traditional method or hope that another company (i.e. SWIFT) creates a more competitive technology. But if money transfer companies like MoneyGram, Western Union, etc. fully adopt XRP, you can bet there are even bigger players waiting on the sideline. Greater adoption, even in the banking world, will lead to widespread exposure, greater interest among investors, and the possibility of a pivot to other XRP-use cases such as commerce giants like Amazon and Walmart.
Remember: 55 billion XRP are held in escrow, the majority of which will be released to the financial world for greater XRP liquidity. That doesn’t necessarily help the price of Ripple in ways current investors would appreciate, but it does prevent the market from flooding with XRP over the next four years. You can look at like this: the 45 billion XRP in current circulation is that belonging to investors which can be exchanged and traded like any other currency. The rest is for the big players that will likely never be released in the marketplace. If Western Union adopts XRP for payment transfers, they won’t be selling Ripple to an average joe on an exchange. They need to hold their coins for liquidity, and likely create an internal marketplace where money-transfer users are buying and selling XRP as a way to move money across the globe. So while the adoption of companies like MoneyGram don’t immediately impact the pricing of XRP, it does create the positive conditions for Ripple to become a ubiquitous currency, asset and technology for the digital world.
Novel Uses for XRP
“Every man takes the limits of his own field of vision for the limits of the world.” –Arthur Schopenhauer
Adoption creates exposure which leads to new forms of adoption. Ripple was designed to improve upon the technology and flaws of bank-to-bank transfers. In a short span of time, we have seen XRP adopted for cross-border transactions, one-hundred million dollar hedge funds and money transfers companies. So here’s the big question: what’s next?
If cryptocurrency becomes a lasting feature in the digital world, then it is likely going to be used in ways we have not yet thought of. Consider the internet. A person in 1998, struggling to send emails, could not have imagined the widespread use it holds today. Crypto will be the same way. In fact, it has to be that way. If we stagnate as just a currency, despite the great feature of decentralization and blockchain, cryptocurrency will fade into obscurity or be a niche tool that most of the world ignores.
Ripple checks many of the boxes necessary for exponential adoption. Transaction speeds under 10 seconds. Almost non-existent fees. High market supply for liquidity and lower per-coin pricing. We have been bullish proponents of an eventual endorsement of XRP by Amazon. While Amazon would not constitute a revolutionary step in use-case (again, another currency feature), it does present a large departure of the original intention of XRP. Which is good. The beauty of these decentralized, open-source currencies is the freedom they provide to their user base. Anyone can choose to start a business that utilizes the strengths of XRP or find novel operations the market has yet to conceive.
The more entrenched XRP becomes in the banking and financial world, the more interest it will draw from other spheres of influence. Consider the implications of a currency like XRP in charities and donations. Or as a tipping feature on social media. The myriad of use-cases is only just being conceived and will continue to grow as the general populace takes notice. Even with a market capitalization of 600 billion USD, crypto is a niche and growing field. If Ripple can continue to hold its place in the top currencies, then both price and market share will grow exponentially.