Market Mad House

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


Sorry Ripple is not the Second Most Valuable Cryptocurrency

Ripple (XRP) is not the second most valuable cryptocurrency. The claims of Ripple’s value you have seen in the mainstream media are greatly exaggerated.

Ripple’s Market Capitalization on 28 January 2018 was $51.972 billion, according to Coin Market Cap. That’s impressive, but Ripple’s value was still less than half of that of Ethereum (ETH) on 28 January 2018. Ethereum had a Market Cap of $114.822 billion on that day.

Such numbers will have many people wondering why are the so-called journalists calling Ripple the second most valuable cryptocurrency? The answer is Ripple was the second most valuable cryptocurrency for a few days around New Year’s Day. Ripple’s Market Capitalization shot up by $148.794 on January 4, 2018, then collapsed when a bubble burst.

Those who want a good view of Ripple’s value and to see the real value can check out Ripple’s Market Capitalization here:

The data presented by Coin Market Cap shows us that Ripple is just another cryptocurrency. It only had a Coin Price of $1.34and a Market Volume of $1.441 billion on 29 January 2018. Good, but nothing to write home about.

So Why Do People Think Ripple is the Number Two Cryptocurrency?

The misconceptions about Ripple come from the way “investment news” is covered by the big media.

The average business reporter has to cover many different markets including stocks, commodities, bonds, fiat currencies, and cryptocurrencies. Chances are the reporter is a journalism school graduate who barely understands any of the markets or finance. Nor does the poor reporter have the time to properly cover any of them.

One day the reporter’s editor hears about Ripple’s value on CNBC and tells him to write a story about it because Ripple is attracting a lot of hits on Google. The reporter does a little research, writes the story, and it gets posted. The reporter and editor forget about Ripple and move on to the next story.

The Ripple even though it is now outdated and inaccurate is still considered “news” by Google. People seeking information about Ripple use the inaccurate story as a reference. Vast numbers of people become Ripple is the number two cryptocurrency, even though that is not true.

The moral of the story for investors and traders: is to do your homework!! Take five minutes to check the price on your own, and always double check any claim about altcoin prices you see online. That includes any claims about cryptocurrency prices I make.

Also, check the date on any news story you see, chances are it might be months or years old. Search engines pull up the most recent major news story on an item when you run a search. Unfortunately, that story might be several months old. It might have been perfectly accurate three months ago, but not today.

So the business reporters are not trying to deceive you. They’re doing their job, but what they report must never, ever be accepted as the definitive truth. Instead use news stories, as the beginning points of your research not as definitive proof.

Is Ripple a Good Investment?

Despite the inaccurate stories about it; Ripple is actually a pretty good investment as cryptocurrencies go. It has some value characteristics including a high Market Cap and a Low Coin Price.

More importantly, Ripple’s technology is being adopted and evaluated by large companies and financial institutions. MoneyGram (NASDAQ: MGI) is examining the possibility of using Ripple’s ecosystem for money-transfers and remittance payments, a Ripple press release indicates. MoneyGram has been described as the second-largest transfer service in the world behind Western Union (NYSE: WU).

American Express (NYSE: AXP) has added Ripple to its’ FX International Payments (FXIP), another Ripple press release revealed. This will allow Amex and Banco Santander (NYSE: SAN) to make cross-border, blockchain-enabled, business-to-business payments between the United States and the United Kingdom.

The Siam Commercial Bank and SBI Remit are using Ripple for a real-time remittance service that connects Japan and the Kingdom of Thailand, a Ripple press release from July claims. Ripple estimated the value of remittance flows between Japan and Thailand at $250 million a year.

So yes, Ripple has a lot of potential as a financial solution, but that potential is not as great as Ethereum. A wide variety of corporations are experimenting with potential uses for Ethereum, through the Ethereum Enterprise Alliance and the Hyperledger Project. Unlike Ethereum, Ripple is just a payment solution potentially a very disruptive one but only a payment solution.

Note: there is no evidence that the XRP cryptocurrency itself is being used in any of these solutions. It should also be noted that Banco Santander is involved in the Ethereum Enterprise Alliance and American Express is part of the Hyperledger Project.

Ethereum can be used for the creation of a wide variety of decentralized applications (DAPPS). The Ethereum ecosystem can form the base of many potentially useful solutions including cryptocurrencies, markets, smart documents, and channels for the delivery of artificial intelligence and other cutting-edge technologies.

The Raiden Network Token Coin Price is higher than Ripple

Therefore Ripple should best be viewed as a cutting-edge payment solution combined with a cryptocurrency. A better comparison for Ripple would be the Raiden Network which offers a Raiden Network Token (RDN).

The Raiden Network Token had a higher Coin Price than Ripple, but a smaller Market Cap and Market Volume on 29 January 2018. The Raiden Network Token Coin Price was $4.70 on 29 January or nearly four times that of Ripple. The RDN had a Market Cap of $235.645 million and a Market Volume of $14.33 million on January 29, 2018.

This indicates that the Raiden Network Token might be a better speculative trade than Ripple. Ripple would be more a long-term value play because investors are investing in the potential of its system. A key advantage Ripple has is that its system is actually up and running, while Raiden’s Ethereum-based payment system is still on the drawing board.

Is Ripple a Pyramid Scam?

There is also a garbage argument for Ripple that all cryptocurrency investors need to be leery of. Sadly, this argument will convince many investors, that Ripple is a pyramid scam rather than a genuine Fintech solution.

The claims about Ripple’s Market Capitalization come from a press release that claims Ripple sold $71.5 million worth of XRP “programmatically” in 3rd Quarter 2017. The release does not say when the program sales were made or who bought the XRP. Worse, it presents no way for investors quantify those claims.

There is simply no way to verify these claims, so this information should be discounted. Until those program sales show up in markets like those tracked by Coin Market Cap they should be ignored. They have absolutely no impact on the market or the market price.

Getting your market information from a press release is not a good idea. As people old enough to remember Enron can testify. Note: press releases can be a good source of news about a company’s business plan, operations, and tech, but financial figures put out by the company itself should always be viewed with skepticism.

Ripple’s press release should raise investor concerns because it pushes the limits of business ethics. Hopefully, some regulator will look into these releases and tell Ripple to stop putting them out. Something to remember is that if bull shit gets put out in a press release, large numbers of “professional journalists” will believe it and pass it on.

Ripple might be a good Fintech solution but it is far from the second-largest cryptocurrency. Smart investors would be well advised to stay away from Ripple until the media hysteria and questionable marketing tactics end.

Disclosure: This commentary is offered purely as food for thought and should not be construed as investment advice. Please do your own thinking and your own research. My arguments are just as likely to be wrong as everybody else’s.