The Ripple Effect

Ripple (XRP) was recently on an impressive bull run. Until it wasn’t. There were a lot of theories circulating at the beginning of the year about what caused the significant rise. The value went so high at the end of December it cracked the top 10 cryptocurrency list and briefly shook up the Forbes list of the world’s richest people.

Observers were seeing a very familiar pattern seen with cryptocurrency market; buzz starts circulating about a particular altcoin and it results in a sudden surge. A few weeks later, a correction sets in and the value falls back to realistic prices.

What Drove the Price Increase in the First Place?

Several factors may have been involved in the quick rise of XRP. Here are some noteworthy events that may have contributed to the rapid price increase of this coin.

 

Venture Capital

The XRP pump was primed for a significant increase many months before the rise. News was circulating in September that the coin was undervalued. At the time, several venture capital groups were making large investments in Ripple.

 

American Express Partnership

American Express announced mid-November they would be partnering with Ripple to enhance the speed and reduce the cost of cross-border payments. The news resulted in a small, short-lived bump in XRP.

 

South Korean Investors

South Korea is well established as one of the largest markets for XRP. Over 50% of all XRP trading volume takes place on exchanges like Bithumb, Coinone, and other Korean exchanges. Naturally, trading activity in December greatly increased in South Korea based on information shared from news and exchanges based there.

December 13 marks the date Japanese and South Korean banks began testing cross-border trials with Ripple in an attempt to make international transfers quicker. During these trials XRP began to double, triple, even quadruple in price over the following week.

 

Coinbase Rumors

During the static news period between Christmas and New Years, rumors began to spread that Coinbase would be adding XRP to its exchange. The sudden buzz surrounding this news led to Coinbase making a public statement on the matter within the first few days of the new year.

Coinbase came out January 4 stating they would not be adding this particular crypto coin to the exchange.

 

Pumped Values and Historical Dumps

Ripple’s co-founder, Jed McCaleb, is also the programmer who started the infamous bitcoin exchange Mt. Gox. McCaleb left Ripple in 2013 but reportedly still retains 20 billion XRP. McCaleb has a history of dumping XRP in large quantities or announcing his plans to do so within a certain time period. In May 2014, he publicized his intent to sell all of his remaining XRP within a two week period. XRP took a nosedive on May 22 as the rumored selloff developed.

Buying frenzies – whether purposely coordinated by whales or caused by new investors rushing to buy the next hot altcoin – cause an artificial lift that is almost always short-lived. A market cap of $250 billion is not sustainable and it exposed XRP as a highly overvalued coin. It was nearly inevitable the craze would lead to a widespread selloff, as it did.

 

What Does XRP Have In Common with Other Altcoins?

There are many coins that will be fighting for top spots on the most valuable cryptocurrency list in 2018. Several of these coins also hit high market caps this month. One such coin was XLM.

Created by Jed McCaleb and Joyce Kim, Stellar is based on the Ripple protocol (note: there is misinformation circulating that Stellar is a fork of XRP although in reality, it is not. McCaleb clarified this in a tweet on November 22.) XLM has enjoyed a 1068% increase the past three months. It is debatable whether it was simply riding Ripple’s coattails, but like XRP, Stellar has benefited from partnerships with large tech firms like IBM.

Other altcoins to watch in 2018 that did not make many top 10 lists in 2017 include Cardona, IOTA, and EOS.