Ripple completes purchase of MoneyGram stake, eyes further expansion
Can we learn anything about Ripple and XRP valuation by looking at the last half year?
In June 2019, Ripple and MoneyGram inked an agreement where Ripple would buy a 10% stake in the under-pressure money transfer giant for $50 million, equivalent to a price of $4.10 a share.
Six months on, MoneyGram found itself using Ripple on-demand liquidity, which utilises XRP, in more than 10% of its US-Mexico transfers.
Now Ripple has completed its $50 million purchase with a final payment, according to a press release.
"Our partnership with Ripple is transformative for both the traditional money transfer and digital asset industry – for the first time ever, we're settling currencies in seconds," said MoneyGram CEO Alex Holmes. "This initial success encourages us to expedite expanding our use of On-Demand Liquidity.
"Partnerships with companies like Ripple support innovation and allow us to invest in creating better customer experiences. I anticipate furthering our growth into new corridors and exploring new products and services."
"Digital assets and blockchain technology have the potential to make a tremendous impact on cross-border payments – MoneyGram and Ripple is an example of that," said Ripple CEO Brad Garlinghouse. "In June, we announced this partnership, and it's encouraging to see the rapid growth and benefits come to life."
Opinion: Ripple's value in perspective
Since the announcement of the partnership, MoneyGram (MGI) share prices have proven considerably more volatile, and lucrative, than XRP itself.
XRP prices hit their yearly high in the days following the announcement of the Ripple-MoneyGram deal and have mostly sunk since then. By contrast, MoneyGram share prices have flown.
From one angle, this may be a sign that the cryptocurrency markets are growing beyond their hype stages. On the other hand, at the time of writing, XRP's crypto market cap is almost 50 times higher than MoneyGram's share market cap, at about $9.5 billion compared to $193.86 million, so maybe there's still plenty of hype left to wring out of the markets.
Even on the higher end, the total estimated value of MoneyGram as a company comes out at $1.05 billion by some estimates. It's still just a fraction of XRP's market cap.
MoneyGram is believed to be the second-largest remittance company in the world, and many XRP adherents are holding up this partnership as a sign that Ripple solutions are valuable and have a bright future.
But by the same token, it's also hard not to reach the conclusion that XRP is almost psychotically overvalued at $0.22 – let alone its all-time highs of almost $4.
Ripple on-demand liquidity will work perfectly fine almost regardless of what the XRP token is worth as long as it's still worth something and has a decent enough market. But it still doesn't actually do anything that any other cryptocurrency with a sufficiently scalable network and sufficiently deep liquidity can't also do.
MoneyGram provides money transfer services to hundreds of thousands of customers around the world via hundreds of thousands of agent locations around the world. XRP facilitates 10% of MoneyGram payments in just one corridor.
As for Ripple Labs as a business, rather than just a massive puddle of XRP, it's somehow meant to be generating revenue by providing services to clients, but it's also in dire need of more people to actually use XRP and Ripple solutions.
One potential explanation for the patent irrationality of XRP's market cap: Ripple and by extension XRP are being buoyed by the same cheap money that's washing into other Silicon Valley startups. WeWork, for example, was valued at almost $50 billion at its peak.
If nothing else, there's something very egalitarian, and very true to crypto form, about letting absolutely anyone – by buying XRP – punt money at a wildly overvalued tech company.
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Disclosure: The author holds BNB and BTC at the time of writing.
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