At the beginning of 2017, Ripple had a total market cap of only 250 million dollars, and now the value of the circulating supply exceeds 11 Billion..
If that fact alone doesn't immediately signal some red flags, then when we look deeper into the reasoning and influences behind the pricing run it will become clear just how overvalued Ripple currently is. Most of the serious investment over the past months into Ripple has originated from Asian investors. In the case of Ripple, most of the investment has come from Japanese investors. Japanese banks and high level investors have been experimenting with XRP, and the cryptocurrency has generated massive hype and expectations within the country. The level of price increases that Ripple has experienced over the past months is vastly disproportionate to any increases in practicality and usability that the coin has experianced.
Will XRP hold onto its gains?
On March 1st XRP was trading at 475 satoshi, but today it is currently trading above 17000 satoshi. When we consider the fact that XRP has experienced a 3500% increase in price over the course of less than 3 months, how could these types of gains possibly be sustainable? This level of change, even though it is positive, should be a major detail for traders and investors to consider when considering entering into a position. While this growth may be great for traders and stake-holders, if the price takes a sizable retreat like I assume it will, investors will quite literally loose billions of dollars. I don't believe that the current pricing level is sustainable in the slightest for XRP, but it may continue to run in the following weeks and months. The only long term outcome that I can see happening a major and sudden price retreat at some point back to a more sustainable level.
I have no idea how long XRP will maintain and continue to gain support, but I know that it will not last forever. I have no intentions to enter into any positions in XRP currently, because it is unclear when the support will drop off. If I was entering into a long term position on XRP it would be a short position, but in my opinion getting into a position too early is the same as being wrong and I don't feel comfortable enough that the price run will not continue.
These types of runs and the bubbles they create have a negative impact on the cryptocurrency market as a whole.
Much of the investment that is going into XRP out of Japan is coming from individuals and investors who don't want to 'miss' the next big crytocurrency. Many of the early investors have already seen huge profits to their positions, but there is no substance to the pricing level in my opinion. All altcoins are driven by speculation to a certain extent, but never has speculation added 10 billion dollars in value to a cryptocurrency supply in a matter of 2 months. If XRP does fail and experiance a major retreat, the negative press that would follow would likely look have a negative impact on cryptocurrencies as a whole.
Many of the people who dislike cryptocurrencies imply that the cryptocurrency market as a whole is just a giant bubble. If this turned out to be true for the second largest cryptocurrency in the market, then the support and likely investment in the cryptocurrency market as a whole would likely experience a decline. People don't want to miss the next big cryptocurrency, but pumping a coin to the extent that XRP has been, will likely have a negative impact on the long term success of the currency.
Even if we don't consider everything that is wrong with XRP, such as the centralization and technical aspects, the current price level is simply nothing other than unsustainable. Coins may be able to be driven to a certain point by speculation and hype, but when the coin makes very little progress towards that success, the dump and price fall that would follow would likely cause many people to loose a very sizable amount of money and investment. One of the worst things that could happen to the cryptocurrency market is if a top currency looses 80% of its value very quickly, regardless of how it fast it gained it. When XRP looses its support and the market turns, I wouldn't be surprised in the slightest if it fell 80% in price and market capitalization in a matter of weeks. This would likely cause institutional and high value investors to be much more skeptical and weary of the cryptocurrency market and investing in it.
I really hope that you enjoyed this post and I urge you to leave any comments, discussions, or input below. Thanks for reading!