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XRP is one of the most highly-traded digital assets which has made it a focus of both traders and investors since it first hit markets. With plans to provide an enterprise-grade blockchain solution for global payments, Ripple has grand ambitions for the closely associated XRP token. However, both have a few important challenges and obstacles to overcome in order to achieve widespread success.
So, will the price of XRP keep increasing? If not, why?
On 22/12/2020 the Securities and Exchanges Commission (SEC) filed a lawsuit against Ripple and two of its executives.
According to the SEC press release "The complaint alleges that Ripple raised funds, beginning in 2013, through the sale of digital assets known as XRP in an unregistered securities offering to investors in the U.S. and worldwide."
Ripple filed a 93-page response to the lawsuit on 01/29/2021, stating that "XRP performs a number of functions that are distinct from the functions of "securities" as the law has understood that term for decades. For example, XRP functions as a medium of exchange — a virtual currency used today in international and domestic transactions — moving value between jurisdictions and facilitating transactions."
|Algorithm type||Ripple Protocol Consensus Algorithm (RPCA)|
XRP price prediction
Cryptocurrencies are infamous for their volatility, but what’s not often realised is that there are several competing factors that can have a positive or negative effect on any coin or token. Before deciding whether to buy XRP or any other cryptocurrency, you’ll need to carefully assess those factors to determine whether you think XRP is headed for price growth or a decline.
XRP vs Ripple: What's the difference?
Unsure about the difference between Ripple and XRP?
Ripple is the name of a US technology company that aims to make it easier and cheaper to send money overseas. Meanwhile, XRP is the native digital asset of the XRP Ledger and is used to facilitate transactions between different fiat currencies.
Ripple uses XRP as part of its RippleNet On-Demand Liquidity service to provide liquidity for cross-border payments, with the goal of eliminating the need for financial institutions to hold costly pre-funded Nostro accounts.
What could drive XRP's growth?
What could hold XRP back?
Where to buy XRP
The actions of Ripple’s competitors could also lead to rises or falls in the price of XRP, so you’ll need to monitor news and developments from other similar projects. Some of the platforms to keep an eye on include:
- Stellar (XLM). Regularly listed as Ripple’s main competitor, Stellar aims to offer fast, affordable and reliable cross-border payments. Developed by one of Ripple’s co-founders, Jed McCaleb, Stellar has so far focused on different customers to Ripple, focusing on providing an inclusive global payments system rather than targeting major financial institutions. Find out more about how the two projects compare in our comprehensive guide.
- SWIFT. Long seen as a reliable and secure way to send cross-border payments, SWIFT has been serving banks since 1973. It’s come in for some heavy criticism from blockchain advocates, but SWIFT has recently been exploring ways to speed up cross-border payments, including the use of blockchain technology.
- Visa. In November 2017, Visa introduced the pilot phase of its blockchain-based business-to-business payments service, B2B Connect. Developed with blockchain startup Chain, the service is designed to allow direct cross-border payments between institutions.
Beyond 2021: What does the future hold for Ripple?
There are interesting times ahead for XRP, and by extension, Ripple.
In late 2020 news of the SEC lawsuit crashed XRP prices by over 50%, only to rally by as much as 70% a month later in January 2021 following a pump and dump coordinated on Telegram off the back of the GameStop saga. Events like this demonstrate that XRP continues to be one of the more interesting coins for traders in search of volatility and wild price swings.
Despite a bruised image we can expect Ripple to focus on rebuilding confidence in XRP and forming partnerships with an increased number of big-name corporates. So far in the history of Ripple, we’ve seen many impressive announcements of the platform partnering with financial institutions that are testing its technology, including Western Union, Saudi Arabia’s central bank, Santander, UniCredit, UBS and a host of others.
What many will be watching with interest throughout this year and those ahead is whether or not those banks will actually adopt Ripple’s technology beyond pilot programs. If it can deliver speed, low transaction costs and scalability as promised, and beat out the competition to become the payment processor of choice for banks, there’s plenty of potential for growth.
Ripple is an exciting project that certainly has the potential to become a major player in the world of payment processing. It boasts impressive financial backing and a long list of big-name corporate partners, as well as what its CEO has called a US$15 billion war chest to fund future acquisitions and development.
However, whether or not it can achieve widespread adoption by, and work successfully with, the existing banking world remains to be seen. Banks are notoriously conservative and hesitant to adopt new technology, and this could be a significant barrier the project will need to overcome.
The bottom line is that you should always do your own research. Make sure you carefully consider all the factors that affect the price of Ripple before deciding whether or not to buy any XRP.
Image source: Shutterstock
At the time of writing, the author holds IOTA and XLM.
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