Ripple price weekly analysis: what can keep Ripple down?

Rhys Muter 14 January 2018

Ripple weekly - ITI

Ripple investors had a tough week riding out storms, but its price could go up again with fairer winds.

Price movements

The price of Ripple (XRP) has had an interesting week. Beginning the week trading at around US$3.21 (according to CoinMarketCap), XRP dropped to US$1.62 by midweek. XRP eventually rebounded towards the end of the week to show a degree of price stability trading at around US$2 (US$1.99 as at time of writing).

It was reported in a previous weekly analysis that the price of XRP had been affected by a readjustment of CoinMarketCap’s pricing information. As the dust has settled on that event, it has become clear that Ripple Labs may benefit from a stabilising XRP. The reason for this is that it makes cross-border payments easier for Ripple Lab’s clients who use XRP as a transfer of value.

Market capitalisation

XRP’s market capitalisation was US$124.2 billion at the start of the week before peaking somewhere around US$134.3 billion. In line with price differentials, XRP’s market cap plummeted during midweek trading as well, falling as low as US$62 billion. XRP managed to reclaim some lost ground by the latter stages of the week, stabilising to show a market cap of between US$75 billion and US$80 billion.

Trade volume

Trade volume was slightly restrained at the outset of the week indicating around US$2.5 billion worth of 24-hour trade. That figure more than doubled to 12 January reaching US$6.8 billion. Another figure that suggests a greater sense of stability for XRP is that its trading volume returned to early levels settling to between US$2.1 billion and US$2.5 billion.

The readjustment by CoinMarketCap appears to have had the effect of stripping away excessive amounts of speculative trading from XRP trading volume. This may give investors and institutions confidence in assessing XRP as a stable currency in the otherwise volatile cryptocurrency market.

Looking ahead

A challenge for XRP going forward will be the rise of decentralised exchanges. The reason for this is that while CoinMarketCap has excluded certain data from its pricing calculations, that trade still exists. There is a strong push in South Korea to clamp down on exchanges not complying with know you customer and anti-money laundering (KYC-AML) policies.

This may have the effect of transforming the exchange landscape to a more decentralised ecosystem of traders. Because of this probability, upward pressures and more volatility are likely for XRP over the longer term. At the time of writing XRP is trading at a US$0.66 premium on South Korean exchanges.

For the more risk-seeking trader, Ripple Labs' strategy is an important factor. That strategy is to see XRP used by financial institutions as a transfer of value in cross-border payments. Price stability is essential to achieve that goal.

While Ripple Labs has benefitted from CoinMarketCap’s readjustment, there is little price control Ripple Labs has other than the powers of XRP’s supply distribution. It seems that the market remains bullish on XRP and new market entrants are keen to get in on the action. It is hard to see upward pressure on XRP reducing over the coming weeks and months.

This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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