It has been a while since the crypto market bled as much as it did in the past few days. However, one coin seems to defy the odds. The currency is XRP. While other top coins experienced double-digit losses, on some days, XRP managed to record gains. So good has the past few days been for Ripple’s native currency such that it has managed to surpass Ethereum as the second most valuable cryptocurrency.
Currently, XRP sits behind Bitcoin on the crypto charts with a market cap of $15 billion compared to Ethereum’s $12.3 billion.
It seems there is renewed interest in the coin. Below we are going to have a look at four factors that influence the Ripple value.
Interest from financial institutions gives Ripple value
Ripple’s infrastructure is designed to make transactions faster and convenient for banks and other financial institutions. It explains why the platform has already seen over 100 institutions adopt its technology and there are more that are joining by the day.
The platform’s blockchain, RippleNet, offers businesses and financial institutions different programs that help cross-border payments happen smoothly.
This includes xRapid, a program that allows financial institutions to minimize liquidity cost if they use XRP as a bridge from one fiat currency to another. xCurrent which is a payment processing system for banks. And also xVia which allows businesses to send payments through RippleNet. All three solutions are crucial in enhancing Ripple value.
Before Ripple came with its solution, SWIFT international payment protocol (utilized by financial institutions to send international transactions) had no competition. However, many people argue that it has the potential to render SWIFT obsolete.
Also, due to its ability to instantaneously transfer money across the globe, RippleNet has been adopted by the likes of Moneygram and Santander. However, it’s important to note that, despite the adoption by many financial institutions, they are currently not using XRP for their transactions. So, once they start doing so, its likely to boost Ripple value.
Ripple value benefits from continued media interest around the Ripple project
Ripple’s team of fintech and finance experts have managed to cultivate media interest around the project through partnerships and customer acquisition. It has been vital for Ripple value as the company gets its feet off the ground.
Already the platform has over 75 clients that actively use RippleNet. On top of establishing a customer base, the platform has used strategic partnerships to create a specific ‘hype.’ Consequently, this hype has evolved to organic press which has helped the platform create a media presence.
In the crypto world, the press plays a crucial role. There is almost a measurable correlation between the amount of coverage a project gets and its valuation. It’s something that has proved correct for Ripple. Positive media coverage has aided Ripple value.
Speculative trading affects Ripple value
Earlier this year in January it became clear that hodlers affected Ripple value. This was after coinmarketcap.com accidentally removed South Korean exchanges from its pricing statistics. As a result, $200 million in XRP temporarily vanished. It turns out three of the most prominent Korean cryptocurrency exchanges control over 50 percent of XRP trade daily.
When XRP hit a high of $3.84 on January 4th, 2018, Bithumb, the largest crypto exchange in South Korea showed that the coin was trading at about $4.47. This revealed that a 16.5 percent premium might exist on Korean exchanges.
But, time has proved that the premium may have been a temporary effect. As of the time of writing the difference in price of XRP on Korean exchanges and other platforms has reduced to $0.01.
Speculative trading is one of the main factors that affect Ripple value. It’s visible through the sharp increases noted on South Korean exchanges until regulation became a barrier.
Ripple value is affected by regulations
As we have seen above, Ripple was able to trade higher on South Korean exchanges due to colossal speculation. The Asian nation has one-third of its population holding cryptocurrency. It has led the way in embracing cryptocurrencies and the blockchain technology.
To bring some order in the crypto markets, Korean banks began to introduce some regulations. Earlier in January banks warned traders and exchanges of freezing their accounts if they were not compliant with the country’s anti-money laundry and know-your-customer policies. This meant there was a possibility that traders would not be able to move national currencies into their crypto trading accounts.
The regulation proved detrimental to Ripple value. They stemmed the inflow of people and money that was going into the crypto markets. Before, there were hundreds and thousands of new trading accounts that were being added on Korean exchanges.
The wild increase in price could directly be attributed to the increased interest, however, this pattern changed once the regulations came into place.