The moment of truth has finally arrived. We’re witnessing the great cryptocurrency crash of 2018.
The granddaddy of cryptos just bit the bullet and with it, the dominoes have begun to fall. While all the top 10 cryptocurrencies are trading lower by more than 20%, the Ripple crash eclipses them all with more than a 33% drop in prices in just one day.
It is nerve-racking because this cryptocurrency alone has wiped out more than $40.0 billion from the market in just one week. That’s the most any cryptocurrency has lost in market value, after Bitcoin.
The optimists are arguing that this could only be a market correction. After all, 20% drops are a usual sight in the cryptomarkets.
While I, too, have been one of the optimists, I’m throwing in the towel this time. Firstly, because prices have precipitously dropped over the past one week and are showing no signs of reversal. And secondly, because this correction has spread like an epidemic engulfing the whole crypto-universe.
I’m scrolling down the list of top 100 cryptocurrencies and I barely spot green on there. Deep crimson double digits are flashing everywhere. It is extremely underwhelming for an analyst like myself. I can’t imagine what you, as an investor, must be going through. But I’ve some conciliatory propositions for you so bear with me.
Ripple, after Bitcoin, had become the most sought-after cryptocurrency in the investor circles. There’s a certain narrative that’s been driving demand for this cryptocurrency. It goes something like this. “Did you hear there’s a cryptocurrency backed by the banks? I tell you, it is the real deal. Buy it before it’s too late. Just buy, buy, buy.”
Not many of the investors who bought it understood its technology, far less understood its true worth. They have been buying because some XYZ person they trust told them to.
When investors are driven by such mob mentality, they buy in herds and they sell in herds. When they buy, they cause a price bubble. When they sell, they trigger a crash.
The governments of South Korea and China (but mostly South Korea) have triggered this chaos by floating the idea of a complete ban on cryptocurrency trading.
Mind you, both South Korea and China are two of the biggest markets for cryptocurrencies. They are as big as the Japanese and the U.S. markets, if not bigger. A significant percentage of crypto investors are concentrated here. So you can imagine that if they begin to offload their Ripple hoardings, prices would have serious trouble finding support. That’s exactly what’s happening.
Another party aggravating this crash is the exchanges. The cryptocurrency exchanges have set up roadblocks for new buyers to come in and save the prices from crashing.
The majority of the cryptocurrency exchanges have either temporarily disabled new registrations or are taking weeks to verify new accounts. The result is that there aren’t enough bidders around to give support to plunging prices. I’ve covered this issue at length here.
That said, one thing is certain. This cryptocrash has more to do with technical market forces than with the fundamentals underlying these cryptos.
Simply put, if you weren’t driven by the herd mentality in your investment, then the fundamental factor that drove you to Ripple is still intact.
Despite the crash, Ripple remains a promising technology for the banking industry to cut costs on cross-border money transfers. Global banks are continuing to take interest in this technology. It is forming new partnerships on an ongoing basis—with the most recent being with MoneyGram. It has managed to shed its image of a centralized cryptocurrency by placing a good 55 billion XRP in escrow.
And above all, Ripple is still up more than 60% in the past one month and more than 260% in a year.
At this point, if you’re an XRP investor, one advice may twist your fate. Believe in the power of “HODL.” Because as long as you are “HODLing,” then technically, you haven’t lost a penny
