Cryptocurrencies are in a general downtrend after many of them reached their record-highs in late 2017. The dramatic fall in price makes some cryptocurrencies look like a real bargain now and offers new opportunities to jump onto the crypto-bandwagon. Whether this is the case with Ripple and its XRP token depends on a number of factors, and this article is going to address the most important technical and fundamental of them by answering the question “Is Ripple a good investment and should I buy now?”.
Invented in 2004 by Ryan Fugger and introduced in 2012 by Ripple Labs, Ripple is real-time gross settlement system (RTGS), payment protocol and currency exchange that uses a network of independent servers to verify each transaction. It offers an almost instant and cost-free solution for cross-border transfers of all types of currencies, including fiat currencies, commodities and even airline miles. Unlike bitcoin which wants to create a decentralized replacement for the traditional banking system, Ripple’s approach is quite different. The company caters to enterprises and large companies who want fast and low-cost money transfers, by facilitating existing banking institutions and encouraging them to employ the Ripple Transaction Protocol.
The token of the Ripple network is called XRP. Unlike bitcoins and ethers which need to be mined by miners, there is already a fixed amount of XRPs created and made available by Ripple Labs. While the coin itself isn’t necessary for Ripple’s network to operate, it does provide certain advantages compared to other cryptocurrencies. For example, the total number of transactions per second (TPS) that XRP can handle is 1,500, compared to Ethereum’s 15 and bitcoin’s 3-6 TPS. In addition, Ripple allows for almost instant transaction settlements (in 4 seconds), compared to ether’s 2 minutes and bitcoin’s 1 hour. With so many advantages, let’s see whether Ripple (XRP) is a good investment right now.
Just like the other altcoins, Ripple’s price-chart and performance closely resembles that of bitcoin. Following the crypto-hype over the course of 2017, almost all cryptocurrencies skyrocketed in value. Bitcoin reached $20,000 in late 2017, ether’s price doubled, NEM and EOS went up fivefold, and Ripple went from $0.20 to $3.30 – a whopping rise. Fearing of missing the train, investors around the world started to jump into the crypto-market, pushing the prices of cryptocurrencies to record-levels. For a short time in 2017, Ripple was the second largest cryptocurrency in terms of market capitalization. Currently, the coin holds a respectable third place with a market cap of around $22 billion, only behind bitcoin and ether. As of today (14th June), one coin trades at around $0.52, which may change by the time you’re reading this article.
It’s important to stress that the total number of XRPs is 100 billion, and out of that number only 40 billion are in circulating supply. The rest is owned by Ripple Labs, with around 52 billion placed in escrow. An additional 1 billion XRPs can be distributed per month, if the company needs funds for new projects. However, there is no guarantee how much XRPs Ripple Labs is going to sell, and any extraordinarily large sell order could significantly hurt the coin’s valuation.
Just like most other cryptocurrencies, Ripple is in a general downtrend. After hitting its record level in December 2017, the coin lost much of its value and trades now at only a fraction of its previous price. Ripple made consecutive lower lows and lower highs since then, and is range-bound between $0.47 and $0.97 since April 2018. These two price-levels are major demand and supply zones, respectively, and we would need to see a break of those levels before having a clearer picture of the future price-action.
As the chart above shows, a clear break below the $0.47 level doesn’t see any meaningful support before $0.20, while a break of the $0.97 resistance to the upside could send the coin up to $1.20.
Technical levels do discount all important market information, and the large number of market orders placed at important levels can accelerate certain breakouts. However, developments on the fundamental side create trends and reverse them, making it important to follow all Ripple-related news before entering the market. Any new agreements and partnerships with large and influential financial institutions could easily send the price up, and 2018 shows a busy schedule for Ripple’s team in negotiating new contracts.
The peak and trough analysis of Ripple shows a similar picture to other cryptocurrencies. The crypto-market has been in a general down trend since the beginning of 2018, showing distinctive characteristics of downtrends in the form of lower lows and lower highs. However, the coin failed to make a fresh lower low recently, signaling that sellers didn’t have enough power to push the price below the previous support. In addition, you need to pay attention to the descending triangle formation on the daily timeframe (green lines), which may signal a break above the upper triangle line given fundamentals add enough buyers to the market.
The absence of lower lows, as shown on the chart above, may also signal the start of a new uptrend. However, to confirm an uptrend, the price has first to break resistance of the upper triangle line and to create a fresh higher high by breaking the horizontal resistance zone (supply zone) at $0.97. So far, the price is at a tipping point to break through the lower horizontal support zone (demand zone), which may trigger a real sell-off on Ripple. Right now, the key is patience and waiting for additional confirming signals to enter either short or long. Let’s see whether technical indicators could be the confirming signal we’re looking for.
Technical indicators use mathematical algorithms on historical price-data to anticipate future price movements. While technical indicators shouldn’t be used to make trading decisions, they can be a helpful tool to confirm a long or short trade setup.
Relative Strength Index – The weekly RSI on Ripple shows a reading of 44, which is generally considered neutral. A reading below 30 would indicate an oversold level and a buying opportunity, while a reading above 70 indicates an overbought market condition and a sell opportunity. However, note that oscillators such as RSI can stay overbought/oversold for a long period of time before the price actually reverses. Some other oscillators show a sell signal, just like the MACD.
Moving Averages – Moving averages try to smoothen the price-action by plotting the average price of an asset. If a moving average points down or crosses below and longer-term moving average, the signal is generally bearish. In the case of Ripple, almost all moving averages send sell signals except the 100-period and 200-period MAs. On the daily timeframe however, all MAs suggest selling Ripple across the board.
By summarizing all technical signals on the weekly timeframe, we get a sell signal for Ripple. A total of 12 indicators suggest selling the coin, 9 are neutral and only 1 indicator shows a buy signal.
Just like with any other cryptocurrency, Ripple has its risks and benefits. The network itself is safe and scalable, although some opponents criticize that Ripple is not enough decentralized which allows regulatory authorities and the company itself to interfere with the system. Ripple Labs already updated its policies following a FinCEN violation and fine in 2013, and now allows only payment gateways and transactions that are fully-aligned with regulatory requirements. This regulation and the ability for a central authority to control the network has not much to do with blockchain’s benefits, and could show to be a risk-factor for the mainstream adoption of Ripple.
On the other hand, the platform itself is lightning fast and processes transactions in under 4 seconds. The very low cost of a transaction (1/1000 of a dollar) makes it an attractive option for large cross-border money transfers, which would otherwise take days and carry significantly larger costs. In addition, Ripple Labs already has over 100 institutional customers and more than 75 of them are commercially deploying Ripple’s protocol. The company also partnered with ZipZap, which could create a direct competitor to Western Union, offering faster and cheaper money transfers. If the company manages to add more customers to its base, this could be a strong backwind to the coin’s price.
Since Ripple offers instant and low-cost money transfers, it’s no wonder that a growing number of banks and financial institutions are partnering with the company. Names such as Santander and American Express are already using Ripple’s protocol, and the list is only expanding. Any hints of Ripple’s future adoption by large players in the banking industry will attract buyers to XRP and rise its price.
The team behind Ripple has been very busy in 2018 so far, and many important events are planned to happen in the coming months as well. New partnerships with large companies are announced for 2018, including FairFX, UniPay, MoneyMatch. This could improve Ripple’s money-transfer systems even more and support the price of the coin during this year. MercuryFX, a global currency specialist offering currency conversions at very competitive exchange rates, has also started to use Ripple’s xRapid payment solution for its operations. XRP is also expected to start trading on new crypto-exchanges, including Satoshi Citadel Industries and SBI.
On the fundamental side, Ripple doesn’t see many challenges since it’s expanding its customer base and cooperates with regulatory and governmental bodies. In fact, the Federal Reserve established a task force last year in an effort to improve the payment system in the United States. The Fed was looking for a fast, reliable and low-cost payment solution, and Ripple sent its proposal. If the Federal Reserve recognizes the benefits of Ripple’s transaction protocol, this would be a major step towards a mainstream adoption.
Ripple is a versatile transaction protocol that allows for fast, cheap and secure cross-border money transfers. This is done through a network of independent servers, that can be owned by organizations and individuals, and which are used to validate each transaction. As a result, the settlement of a transaction lasts less than 4 seconds, and XRP – the network’s token – can handle 1,500 transactions per second.
However, just like any other cryptocurrency, Ripple XRP is in a downtrend since the beginning of 2018. Trading at just a fraction of its record-high in late 2017, you may ask yourself “is Ripple a good investment and should I buy now”. The current technical picture calls for additional confirmation before entering into the market, with $0.47 and $0.97 being important levels to watch. Technical indicators mostly send a bearish tone, which is no wonder considering the poor performance in the recent period.
On the other side, fundamentals seem to support the coin so far. New partnerships are being agreed and even the Federal Reserve is interested in adopting Ripple’s transaction protocol. If this cooperation materializes, it could lead to an entirely new and exciting chapter in the life of the coin. If you’re interested in buying XRPs, continue to follow the news and wait for a fresh higher high to form, which would confirm a new uptrend.