With millions of Americans now sent back home because of the resurgence of the novel coronavirus, along with exciting company-specific news, blockchain payments specialist Ripple (CCC:XRP) should be enjoying rave demand.
And in most ways, it has been. A month ago, the underlying blockchain reward token XRP was trading hands at a little over 25 cents. At time of writing, the price has more than doubled.
Then again, winners and losers can be made in the cryptocurrency market, often in a blink of an eye. On Nov. 24, the ripple token breached the 72-cent level, according to Coinmarketcap.com. Thus, from where I stand, XRP has hemorrhaged a staggering 27% in just a matter of weeks. If you don’t know this already, cryptocurrencies are not for the faint of heart.
Nevertheless, the volatility in XRP is strange given the positive developments at Ripple. First, as InvestorPlace contributor Will Ashworth pointed out, growing rumors suggest that the company could go public in 2021. What prevented blockchain projects from seeking the warm embraces of the traditional capital markets was the coronavirus pandemic. Assuming we see some normalization next year, it could be a big one for crypto-related endeavors.
Second and most importantly as far as XRP owners are concerned, Ripple will execute an airdrop, basically a giveaway of a new cryptocurrency. In this case, the tokens will be called spark. Better yet, popular virtual currency exchange Coinbase will support the initiative. So long as you have XRP in your Coinbase account on Dec. 12, you’ll receive spark tokens that correspond to how much ripple coins you own.
Basically, what we’re talking about is free money. Sure, spark may take time to increase in value. But with cryptocurrencies becoming increasingly integrated with the mainstream consciousness, in all likelihood, it will have some value.
Yet ripple coins have been badly deflated since hitting their peak recently. Why?
For Ripple, Focus on the Prize
Unlike the stock market, cryptocurrencies are always trading. Moreover, they represent a true international exchange of supply and demand – and we Americans don’t dominate the sector. Indeed, so many big trades occur in Asia while we’re sleeping. This is a pure democratic system, which has its pros and cons.
One of those cons is that you can expect the unexpected, so buyer beware. But there’s also a less convoluted answer for the woes impacting ripple tokens and other cryptocurrencies: major players – or “whales” in crypto parlance – wanted to cash out after scoring huge profits.
To pour salt on open wounds, the selloff has caused severe technical damage on the charts. Therefore, we may see even more volatility ahead.
I don’t know what else to say besides these two things: number one, welcome to virtual currencies! Over the long run, you should make out very well. But getting there can be a real drag. Number two, investors should focus on the bigger picture.
Remember, Ripple’s main ethos is to leverage the blockchain innovation to create a global payments solution that rips apart old assumptions associated with our archaic bank transfer process. By essentially eliminating the last-mile problem in monetary transactions, Ripple can facilitate microtransactions and offer financial connectivity to the unbanked.
While this has enormous implications for developing countries – many people from such areas are unsurprisingly interested in the blockchain and cryptocurrencies – the issue of the unbanked affects us here at home.
Source: Chart by Josh Enomoto
According to data compiled by Statista.com, in 2009, 7.6% of U.S. households were unbanked. Two years later, this metric increased to 8.2% due to the aftermath of the Great Recession. Last year, the unbanked population dropped to 5.4%, a tip of the hat to President Trump’s economic policies.
But given history and common sense, the unbanked community will likely increase in the years ahead. Further, racial disparities in the economic recovery could spark serious social tensions. Ripple has the backing and the technology to implement meaningful change which should bode well for XRP.
Don’t Forget the Convenience Factor
About two weeks ago, I received an email from my banking institution that one of my local branches would be temporarily shut down. It turned out that someone with Covid-19 was in that location, possibly compromising others. While I appreciated the safety first approach, I must admit it was a drag.
Subsequently, issues related to convenience (or lack thereof) was cited as one of the reasons why consumers chose not to have a bank account. However, a blockchain-based platform could solve these issues and many more, including the biggest reason outside of lack of money: trust.
If you think about it, it’s startling that with all the conveniences associated with improving technology, the broader finance sector remains tethered to antiquated thinking. Frankly, banking hours and accessibility are cumbersome, with many firms adopting a Monday through Friday timeline. What is this, 1957?
What Ripple has demonstrated is that the technology to move finance and banking forward already exists. Change is inevitable. Let that thought, not volatility, be the ultimate guiding principle regarding XRP.
On the date of publication, Josh Enomoto held a long position in XRP.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.