What’s behind Ripple’s rapid rise? Panicked investors on the hunt for crypto bargains.

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Blockchain company Ripple made headlines after its cryptocurrency XRP rose 15x in value in just three weeks after almost five years of no growth. Ripple co-founder Chris Larsen even briefly overtook Mark Zuckerberg in fortune earlier this week, according to Forbes.

Ripple’s claim to fame is its ability to make cross-border payments in 10 to 15 seconds compared to the three days it takes at Swift, the 44-year-old global financial messaging cooperative now used by over 11,000 institutions in 200 countries is being used. But it’s not belief in the value of the Ripple platform that is fueling the recent call for its coins. Instead, the sudden interest in XRP seems largely driven by fear – the fear among ordinary people around the world that they might miss out on the big payouts that cryptocurrency investments seem to be promising.

It is the timing of XRP’s rise in trade that supports this idea. The currency introduced in 2013 has rarely exceeded a cent in value since then. But it took a sudden spike in the summer, around the same time Bitcoin started rising and climbing to around 35 cents, before falling back into the twenties and teens. Then it started rising again around December 13th after banks in Japan and Korea announced plans to test the technology. Two days later, on December 15, Fortune reported that financial services company Bloomberg had made XRP one of only four cryptocurrencies for which it provides pricing data for its terminal service (the others being heavyweights Bitcoin, Ether and Litecoin), which it said. a new legitimacy gave currency. XRP has climbed about 1,500 percent since then this week to a high of about $ 3.84.

Interestingly, Bloomberg’s listing of XRP appears to be more a result of chance than careful foresight of the market. Bloomberg tapped Luxembourg-based Bitstamp – one of the oldest and most respected global cryptocurrency exchanges – for its newly added data feed. And Bitstamp randomly lists XRP on its very short list of currencies as a result of Ripple’s active lobbying in 2013/2014 to go public, Ripple VP Asheesh Birla told VentureBeat.

Ripple’s investors may not understand the coin

If investors hope that Ripple’s returns will reflect the values ​​provided by Bitcoin, they may be misunderstanding the currency. XRP lacks the scarcity that Bitcoin has. Only 21 million Bitcoin will ever exist, while Ripple’s cap is 100 billion coins.

And while Ripple may look like a good investment bet, given numerous agreements with banks around the world, only one of those banks is currently actually using XRP coins, Birla told VentureBeat. Ripple is pushing to get its customers to adopt the currency, but it’s unclear how many are doing so. CoinDesk, whose parent company Digital Currency Group has a stake in Ripple, stated in a story yesterday that instead of caring about Ripple’s RippleNet transaction service, the XRP, “the vast majority of Ripple’s banking customers use the company’s xCurrent product uses – a glorified messaging platform. “

Meanwhile, Swift, the interbank network that Ripple is trying to disrupt, has taken serious steps towards providing a blockchain-based service, which could seriously harm RippleNet’s prospects.

XRP is attractive because it is available and cheap

In an attempt to build liquidity for its RippleNet service, Ripple has made sure that XRP is available on exchanges around the world. The company announced on its website that the currency is currently tradable on around 50 stock exchanges around the world. And that could be another key factor in its surprising rise: while there are now hundreds of cryptocurrencies, only a few are actually available for trading on public exchanges. And if you only look at the most trusted exchanges, the choice of currencies available to the average investor shrinks even further.

XRP happened to be the cheapest asset available on several major exchanges when Bitcoin and Ethereum soared over the summer. And when new crypto investors flocked to the exchanges in mid-December (in numbers so large that some exchanges like Bittrex had to close their doors to new users), they were faced with a price of $ 17,000 for Bitcoin, a price of $ 500 for Ethereum and a $ 240 day for Litecoin, while XRP appeared to be a bargain price at around 25 cents.

This wave of interest “is obviously completely misguided as different cryptocurrencies have different token offerings and what counts for market capitalization,” Charlie Morris, CIO of crypto asset management company NextBlock, told VentureBeat. “But I’m not sure newer investors really understand what they’re doing.”

Even now that XRP has hit the $ 3 mark, it remains the cheapest asset on almost all major exchanges. Only Hong Kong-based Binance offers a “cheaper” asset, TRON, which is currently trading at around 28 cents, and on that exchange, TRON is actually way above XRP with a volume of $ 3.94 billion of the cryptocurrency traded Thursday compared to $ 805 million in XRP.

Big in Korea

The exchange that handles the highest volume of XRP trades is the Korean Bithumb, which has handled 26 percent of all XRP trades in the past 30 days. Interestingly, Bithumb investors were big on XRP over the summer but are now trading in smaller volumes. Investors on other exchanges – like Korea’s Coinone and Hong Kong’s Bitfinex and Binance – didn’t seem to get the idea until December and appear to be the ones fueling the current high prices.

Who exactly is attracted to these “bargain” currencies? “It’s literally housewives, college students and grandmothers who are all investing in these different currencies,” Bernard Moon, who heads the Korea-based SparkLabs accelerator, told VentureBeat.

A Korean-based cryptocurrency expert who refused to be named told us, “Ripple has invested a lot of money in marketing and direct lobbying with the Korean cryptocurrency exchanges. Currently, many Korean investors are looking for cryptocurrencies that they can own whole units of as Bitcoin is considered too expensive. Also, they tend to buy a wide variety of cryptocurrencies, increase their investments when a particular coin rises, and sell when it falls. So if a coin goes up, its Korean following will go up dramatically, and it will go down if the price goes down too. The only cryptocurrency that has a significant loyal following is Ethereum – the average Korean investor in Ripple doesn’t know the specifics of Ripple. “

And Simon Kim, co-founder of Hashed, a leading cryptocurrency fund in South Korea, told us, “Ripple has been a popular coin in Korea for a long time. Many uneducated investors were convinced that just because it was cheap, the price of Ripple is likely to rise much faster in the future. In December, Ripple announced its partnership news with many financial firms in the Korean community. Also, there was a prospect that Ripple, a more centralized coin, would be relatively safe from government regulation. After all, Ripple has long been based on the belief that now is the time to go up, as prices haven’t risen in a long time. In this situation, Ripple seems to have drawn a lot of attention. As you can see, Korea is a very connected country and cannot stop anyone if it accelerates. “

Ripple sees the price increase as justified

Ripple’s Birla said it made sense that XRP would be the most heavily traded on Asian exchanges. “Digital assets in South Korea are generally pretty hot. And many of our first movers were in Asia, ”he said.

Birla added that the company wasn’t worried about the massive speculation in the currency. “It’s better than four years ago when no one cared about us,” he said. “And whether you invest in Bitcoin, Ethereum, or XRP, you bet there will be a use case for that currency. There are hundreds of use cases built on Ripple beyond cross-border payments. “

Those hundreds of use cases, Birla said, are numerous applications that third-party developers appear to be building on top of the Ripple blockchain. VentureBeat asked for specific examples of apps that are created on the platform, but have not yet received a response from the company. [Update: Ripple has followed up with a single example: wallet app GateHub.]

Ripple is based in San Francisco. According to Pitchbook, the company’s most recent institutional funding was a $ 55 million increase in Series B in September 2017, led by SBI Holdings, which put the company’s pre-valuation at $ 355 million. Standard Chartered, Accenture Ventures, Hard Yaka SCB Digital Ventures, NKM Capital, Santander Innoventures, CME Ventures, Abstract Ventures, Kaplan Group Investments, Seagate Venture Fund, ThirdStream Partners and Venture51 also took part in the round.

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