How Does Ripple (XRP) Benefit from the Dropping Price of Bitcoin?
Ripple (XRP)–It’s been a tough month for cryptocurrency.
Nearly every currency has suffered double-digit losses in value since the start of the new year, and the market is down nearly half its total capitalization since peaking on January 7th (830 billion USD vs 460 billion). Despite weekly announcements of spreading adoption and new partnerships, Ripple has been unable to immunize itself from the bear market and dipped below 1.00 USD for the first time since December 2017.
So while it may appear gloomy for XRP, and the market as a whole, here is how Ripple can benefit from this bloodbath in pricing:
Better Market Practices
At one point, the market is going to wake up to the artificial pricing imposed by BTC pairings. While XRP, LTC and the rest of the market sinks, there will come a tipping point moment where investors step back and say, “Is XRP really worth only 80 cents? While Cardano, a project that does not even have a working product, can be worth 0.40 USD?” Unfortunately, cryptocurrency does not have the same metrics of the traditional stock market that allow traders to gauge the price of a stock. Companies make products, they generate profits and publish reports that allow the market to adjust accordingly. The ephemeral pricing structure of crypto allows for prices to leap 1000% in a week, but also create the conditions for equally brutal decreases and a general erratic pricing structure. From the outside looking in, it gives the perception of a bubble. How can 28+ cryptocurrencies have a market value of over one billion USD, when all but a handful have yet to produce a working product with real world implementation?
If there is a silver lining to the bear market–largely caused by the overall collapse of Bitcoin–it’s that cryptocurrency will come to be valued on an individual basis, like stocks, as opposed to market money being tied to the price of Bitcoin. We wouldn’t judge the worth of the stock market by the price of APPL stock alone. But when Bitcoin prices plummet, or even take a dip, we see the entire industry go down in red. That’s an uncomfortable and frustrating situation for most investors, particularly those who would prefer to keep their money in crypto as opposed to cashing out. Of course, you can get ahead of the downturn and move your money back to fiat, but that defeats the purpose of cryptocurrency. Crypto is not just an asset, it’s a currency. You don’t trade US Dollars on a daily basis just because it’s losing value relative to the British Pound. That might be an idealistic view of crypto–there are many investors simply in it for profit and could care less about the technology–but either way, widespread cashing out is only pouring gasoline on the fire.
We would like to make something clear: we’re not against Bitcoin or in the business of spreading Bitcoin FUD. What’s good for Bitcoin, historically, has been good for the entire market. When BTC prices were soaring through Q4 2017, almost every coin benefited from the flowing capital and increased awareness being brought to cryptocurrency. Likewise, 99% of the non-crypto general public associates the entire industry with Bitcoin. If they read about Bitcoin prices plummeting, they don’t see an opportunity to “buy the dip.” They hear the echo of a hundred I told you so’s, coupled with the vindicating relief that they were not silly enough to buy into a bubble. So when Bitcoin hurts, at least for now, the entire industry is going to suffer both short and long-term ramifications that extend past the price drop.
Push for Independent Ripple Valuation
So what does this mean for Ripple? First, it increases the need for ubiquitous fiat pairings for XRP across exchanges. As of right now, few Western customers have access to the direct purchase of XRP with government fiat. This may seem like a nagging point (after all, you can purchase BTC and exchange it for XRP), but it’s taking a step in the direction of independent valuation of XRP–pricing not tied solely to BTC or ETH. There is an untapped investor-base that desires to purchase all of their crypto directly with the fiat they use for all other purchases, including assets and securities. Valuing an asset in Bitcoin is foreign and inefficient. By imposing a two step process–purchasing BTC/ETH first, then XRP–it convolutes the process, making it less user-friendly and raising skepticism. In our particular market conditions of a falling Bitcoin price, numerous investors are steering clear of cryptocurrency all together, which negates the vital step of Bitcoin being purchased to buoy the price of the entire market.
Falling Bitcoin dominance also allows for the market and perception of cryptocurrency to undergo a correction that extends beyond valuation. So much of the public perception of crypto is centered around Bitcoin, for better or worse. The baggage of past BTC transgressions–Silk Road, governments bannings, astronomical electricity usage, slow/high fee transactions–becomes bundled up in the narrative of crypto. If Bitcoin burns to the ground, it hurts the crypto, it hurts the wallets of investors, but it also fertilizes the soil for a new industry to grow out of. Bitcoin still has amazing potential and value in the future, but it’s equally healthy for cryptocurrency for the public to start looking at other currencies. Ethereum is a particular digital asset that could garner widespread excitement. Newer generation coins like Tron and IOTA should be getting as much attention as Bitcoin by the press.
And then we have Ripple.
No other cryptocurrency can claim as much of a foothold in real world use, fintech adoption, and the potential for industry disruption as XRP. Ripple is building partnerships at a rate that outstrips all competitors, and it has the potential to implement new use-cases (such as market commerce transactions) more efficiently and effectively than Bitcoin–if given the opportunity. The passing of Bitcoin, at least in terms of market dominance, opens the door for powerful cryptocurrencies to fill the void. Ethereum is making a strong case with a market cap roughly ⅔ that of BTC. But Ripple has equal potential, particularly with the buzz and interest in the financial industry. Cryptocurrency enthusiasts may be filled with the ranks of libertarians and other anti-bank, anti-establishment diehards, but it’s impossible to deny the position Ripple is carving out for itself. If Bitcoin continues to falter, look for XRP to be one of the first coins to benefit in the aftermath of the market upheaval.