While bitcoin, the cryptocurrency king, soared more than 1,200 per cent last year, Ripple rose a whopping 35,000 per cent in the same period. Today, Ripple has a total market cap of a jaw dropping 17 billion while back in early 2018, XRP boasted a total market cap of than $140bn and ranked second in CoinMarketCap’s directory. Ripple’s staggering growth, currently puts the cryptocurrency in third place right after bitcoin and Ethereum in market capitalisation according to CoinMarketCap! But what is it that makes Ripple grow so fast and what causes its sharp dips and peaks?
Let’s start by explaining what Ripple is all about…
Ripple is a San Francisco-based blockchain startup led by chief executive Brad Garlinghouse that dates back to 2012. The network focuses on digital payments in any governmental currency like USD or Euro. It works with a number of institutions including UBS, Santander and American Express to apply blockchain technology to payments, making them faster and cheaper.
This is what makes Ripple different from Bitcoin; Ripple wants to simplify transactions of existing coins, where Bitcoin wants to have its own coin. Over 100 banks are already part of the Ripple network, with American Express, the Spanish bank BBVA or the France based Crédit Agricole as examples.
Why does Ripple’s price fluctuate so much?
While Ripple is admittedly a fast growing coin, currently the third largest in the world, Ripple’s price has gone through some major changes over time. Back in May, Ripple prices plummeted a staggering 50 percent on their January high in less than a week with investors suggesting that CoinMarketCap’s exclusion of marked up data from South Korean crypto exchanges was to blame.
But there’s a much bigger picture behind Ripple’s steep value fluctuations. Ripple’s XRP token can’t be mined and are instead issued by Ripple Labs. There is already around 40 billion of them with the potential of a billion more being made each month. Ripple’s immense supply is part of the reason why XRP prices remain so low. As with the dollar, the danger in releasing any currency is that you increase inflation and devalue your own coin. Ripple has to make sure the XRP tokens are managed well enough to prove this doesn’t happen!
Sources: Global Coin Jul 10, 2018 7:55 GMT | ripplenews.tech Jul 2, 2018 10:15 GMT
*Please note that this article is not meant to be understood or interpreted as investment advice or suggestion of an investment strategy with respect to any financial instrument.