Login Register
  • BTC
    7473.87
  • ETH
    147.75
  • LTC
    45.44
  • BCH
    210.02
  • EOS
    2.727
  • ETC
    3.889
  • DASH
    52.62
  • XRP
    0.2263
  • XLM
    0.05521
Login Register

Fundamental Analysis of Ripple & XRP - Is it Portfolio Worthy?

08/17/2018 12:00

The difference between Ripple and XRP

Ripple seems to always be in the news. It's a polarizing coin in a world where crypto is the polarizing ecosystem all to itself. It not only has its core group of followers but it also has its fair share of detractors. This article intends to clear up the confusion, get the facts straight and give an outlook on XRP the token.

Ripple Labs is the name of the company which created the XRP token. The two are closely tied but different when you take a deeper look. You cannot mine XRP like bitcoin or litecoin.

The sole purpose is to move money from point A to point B. To be more efficient and effective over wire transfers. Ripple intends to become an instant form of money transfer (average transaction times are four seconds). The network can handle about 1,500 transactions per second. Ripple, the company, contends it can handle up to 50,000 transactions per second which is on par with Visa/MasterCard.

Ripple Labs creates payment software for the banking sector. Their flagship product is xCurrent - which does not use XRP. They do have an upcoming product xRapid which will use XRP so that it can source liquidity and allow customers to have access to fiat currency. It is supposed to make transactions faster.

The consensus ledger Ripple utilizes is feature rich and fast enough that every month more financial institutions are adopting it as their go to way to perform business operations. It truly is an improvement on the traditional way that banks have historically worked.

Ripple is much different than what many of us have become accustomed to with the numerous other crypto projects. It’s not a traditional crypto asset. The company boasts almost 300 employees and has boat loads of money at their disposal. They are running a company with a purpose to serve banks. Bill Clinton the 42nd president of the United States will deliver the keynote address at the upcoming Ripple Swell conference. The company has become known for its celebrity endorsements and support.

A lot of newer investors of XRP do not realize that the deals Ripple Labs make or payment channels they set up do not or will not use XRP tokens. Holding XRP is not akin to holding shares of Ripple.

The company Ripple is trying to separate itself from the XRP token. Is this because they are facing three lawsuits as well as SEC scrutiny? The company has been talked about the differences between themselves Ripple Labs and its native token XRP. At ripple.com they go on to give more information about the differences.

There is a maximum number of XRP that will ever be produced which happened at its inception. That number of 100 billion cannot go higher which means no new XRP tokens will ever be produced. Ripple owns a lot of the 100 billion XRP in circulation (estimated at 60 billion or 60% of the total supply). This XRP is locked up and will be released over the next four years.

Each month, 1 billion XRP are released for Ripple to sell on the open market. They do not necessarily liquidate this XRP. Based on my research the people at Ripple genuinely love the XRP token so I do not truly see this as dumping opportunities for them. I can see it being reinvested in the company for the long-term vision.

If the company Ripple dissolved, XRP the network would still survive but since so many people believe the two are one in the same the price would without question plummet.

On CNBC during the first week of August Brad Garlinghouse, the CEO of Ripple, said that the future of Ripple “is bright,” as many banks will be using the XRP ledger by the end of 2019. During Q3 2018 the company has tried to show the public the separation of Ripple and XRP. They did this with a logo rebranding campaign and also confirming once again they are not going to dump their supply on the public. They have two new white papers out about security upgrades to the protocol with the hopes of gaining new clients.

There are hosts of negative articles out there about XRP and Ripple. The main problem with XRP’s is the way they were distributed. XRP tokens were pre-mined which does happen for many cryptos. What rubs people the wrong way is that instead of distributing the majority of it, the management and Ripple itself own the majority of the initially issued tokens (60%). The way network fees are paid is through burning XRP’. This essentially supplements everyone in proportion to the amount of the token they own.

Then you have one of the founders Jeb McCaleb who has ~5 billion XRP. He then left Ripple to start his own coin called Stellar Lumens. McCaleb is still cashing out $20,000 per week and in 2019 will be able to cash out about 750 million XRP’s. Online talking heads don’t like XRP most of the time because it does not fit with their ideology of what a cryptocurrency should look like.

 

Is XRP worth an investment?

Now what I always try and do is zoom out and filter the noise out. Looking at XRP from a long-term investment, the success of XRP is squarely tied to the success of Ripple. If you are not a Bitcoin maximalist and have a diversified crypto portfolio, I think it would warrant a couple percentage points of your holdings. My reasons include the way XRP is different from the likes of bitcoin and ethereum. The company has very deep pockets which allows it some key advantages other cryptos don’t have in the space. This greatly helps the network effects for the coin.

Below you’ll see the two sides that I am talking about:

 

An XRP Contrarian View:

Just one of the many highly critical takes (from 8/7/18)

Here is the counter to all the negatives from what other cryptos/personalities have stated.  Source: fudbingo.com

In conclusion, Ripple is the most relevant and successful crypto payment processor in the world. Whether you are part of the XRP Army or a Bitcoin maximalist. One cannot take away that it is becoming a prominent crypto that is partnering with large financial firms. If successful, it could greatly outperform its 13 billion market cap and be a 10x+ investment in the years to come. Remember the reason why you can get this return or take a loss is because no one knows how 2019 will actually unfold for the company and their token.

In my early days in the crypto space, I was highly critical of them because it is what I was told to believe by the crypto community. These days, I have come around to the other side of this argument and recognize that it probably has a place in a crypto portfolio.

If we look at the charts from a technical analysis point of view here is my take as of August 2018.

I’ll be completely candid for where the chart lies as of August 2018. Looking through the daily long-term view nothing about the chart says buy me. The thing with Ripple over the past two years when it moves, it goes quick and it's hard to get on that train. For instance, from December 11th, 2017 to January 4th, 2018 it rose 1,500% bottom to top (this has happened twice in 2 years).

For long term investors having a 3%-5% of crypto portfolio holding offers a good diversification vehicle and offers something different from your conventional crypto holding. Starting one quarter of your overall position at these levels is a solid foundation. I would continue to add a quarter of my position at 4300 SATS and continue so down to 3000 SATS (my gut tells me XRP won’t be falling through the 3000 SAT level, but I’ve been dead wrong before). The reason I have these levels is I don’t know when XRP will turn around or bottom. So, if you have a few laddered buys it provides you with a position -- if you are a LONG TERM INVESTOR. Swing traders stay away from this advice.

As a XRP investor one would need to recognize it as a volatile investment compared to bitcoin. If this type of holding doesn’t seem like something you can stomach, then stick to your style. Crypto portfolio management isn’t a one-size-fits-all game plan. To me owning XRP is a higher risk, higher reward play that you would need to actively review/manage once per quarter. If that isn’t something you are interested in, stay away. The key takeaway is come up with your game plan, follow it and be disciplined to that rule set.

 

Good luck and please let me know if you have any questions or comments in the section below.

-Mark

 

 


Suggested Posts

Mark Dukas XRP Ripple
Read more
  • 0

    It's curious that you're ignoring the remainder of XRP's past. The bottom is potentially a helluva long way from here if you look back to 2013. It's bottomed twice in the 500-700 satoshi range. Like most highly centralized alts it pumps like crazy when it does push. You can't guarantee supply nor really anything about this coin as Ripple will do whatever the hell they want with it.

    C
    Submitted 1 year ago by Chuck

Please login or register to leave a response.