Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Is Ripple Surging and is it Sustainable?

The third most valuable cryptocurrency; Ripple (XRP), has surged in the last month. However, that surge may not be sustainable.

Specifically, Ripple’s Coin Price rose by 18.05% between 25 December 2019 and 24 January 2020, Coinbase estimates. However, Ripple’s 22₵ 24 January 2020 Coin Price was far below Ripple’s all-time high Coin Price of $3.54 from 2 January 2018.

Ripple’s Market Capitalization of $9.804 billion was far below Bitcoin’s $154.575 billion Market Cap on 24 January 2020. These numbers are CoinMarketCap’s 24 January 2020 estimates. I think Ripple’s Market Cap is low because it is not attractive to speculators.

To explain, they designed Ripple as a money transfer mechanism and Bitcoin (BTC) as a store of value. Hence, I suspect Ripple’s utility makes it less attractive to speculators. Thus, Bitcoin had a Coin Price of $8,502.61 on 23 January 2020 because speculators think it is a strong investment.

What is the most valuable cryptocurrency?

Interestingly, neither Ripple nor Bitcoin is the most-traded cryptoccuency. Instead, CoinMarketCap estimated the stablecoin Tether (USDT) had the highest 24-Hour Market Volume on 23 January 2020.

The 24-Hour Market Volume is the amount of a cryptocurrency the markets move on a specific day. On 23 January 2020, Tether had a 24-Hour Market Volume of $33.683 billion. In contrast, Bitcoin had a 24-Hour Market Volume of $24.454 billion and Ripple had a 24-Hour Market Volume of $1.23 billion on the same day.

Traders prefer Tether and Bitcoin because there is far more market demand for those altcoins. Traders love Tether because you can sell it for U.S. dollars, the world’s most popular fiat currency fast. Traders love Bitcoin because there is a huge market for it.

Ripple vs. Tether

In contrast, people only use Ripple (XRP) as a low-cost, fast, international money transfer mechanism. Major banks; such as Banco Santander (NYSE: SAN), accept Ripple money transfers and convert them into fiat currencies.

Traders love Tether because each USDT Coin contains a digital robot that will release a $1 payment from a bank trust account. To convert Ripple; however, users must sell it, which slows transactions by adding a layer of complexity.

Under those circumstances, I think the adoption of stablecoins; such as Tether, by major banks could destroy Ripple’s value. Conversely, a Ripple stablecoin could increase Ripple’s value.

When Cryptocurrencies could Achieve Mass Adoption

Theoretically, you could create a Ripple stablecoin that could pay out U.S. dollars or Euros from an automatic teller machine (ATM). Thus, you could use Ripple to get money you can use in the real world.

Stablecoins are popular because they help cryptocurrencies perform money’s most important function. That function is to pay for things people need such as food, fuel, clothes, rent, and mortgages.

I do not believe cryptocurrencies will achieve mass adoption until you can use a cryptocurrency to buy food from most grocery stores. Currently, I think both Ripple and Tether are 10% of the way towards that goal.

Why Bitcoin will never achieve Mass Adoption

Given those realities, I believe mass adoption of cryptocurrencies is five to 10 years away.

Additionally, I do not think Bitcoin (BTC) will ever achieve mass adoption. To explain, I believe BTC is too slow and clunky to process large numbers of payments.

For example, Blockchain estimates Bitcoin was processing only 3.317 transactions per second (TPS) on 24 January 2020. Under those circumstances a Bitcoin payment solution could crash if it tries to process over four TPS. Even if the platform worked it could take several hours to process a payment.

In contrast, Ripple’s XRP Ledger has processed up to 140 TPS in 0.2 seconds, Blockmanity claims. Based on Blockmanity’s claims I calculate Ripple could process 700 TPS a second.

Thus, Ripple could achieve mass adoption but Bitcoin (BTC) could not. Given those possibilities, Ripple could have value.

Speculators need to watch Ripple because it theoretically could have a great deal of value from mass adoption. However, I think mass adoption of any cryptocurrency is several years away.

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