As we all know, the cryptocurrency market is always full of surprises and these days, XRP has been the star of the show. At the time of launch, we’ve seen a massive increase in its value from initial launch, creating discussions all over the OverTraders.com network and elsewhere. And even as others celebrate a dramatic comeback, an appropriately cautious view is in order. This latest rally does not mean we have entered into a new permanent uptrend. Rather, it might be an overhyped speculative bubble driven by lots of hot air and wishful thinking.
Just when one would think that XRP is running out of steam, it rises again to 2.35 €, showing an amazing increase of 14.16% over the last 7 days. It’s still 33.21% below its ATH (all-time high) of 3.53 €. That volatility is indeed undeniable. The increase we witnessed on March 2nd was historic at 34.09% but it was soon countered by an 18.76% drop the very next day. These wild swings are what you see in a market driven by sentiment, not by rock-hard fundamentals.
Perhaps one of the strongest arguments powering the bullish narrative is the apparent rising institutional interest in XRP. Such potential for mammoth asset managers such as BlackRock to open the flood gates with XRP ETFs, it’s impossible to deny, has generated plenty of buzz. The promise of easier access for institutional investors alone would create a tidal wave of capital. Potential doesn’t make things real. We’ve seen phenomenal enthusiasm for other altcoins and ETFs come before this. In reality, the effect is usually much less dramatic than people like to imagine.
Additionally, a lot has been made of XRP’s price movements following historical Fibonacci extensions, indicating foresight and more upside. Although technical analysis can provide helpful context, chasing the ghosts of found money—the past—tends to lead down the wrong path. As we’ve asked before, the market is a dynamic environment, and unexpected factors can quickly upend projected trends.
The argument that supply is limited and demand is rising is yet another tired rationale for XRP’s rapid increase in price. Because there’s a finite number of XRP tokens—just like there’s a limit on the number of bitcoins—basic logic dictates that increased demand must eventually push prices up. Yet this can only be the case if the demand is real and long-term. If speculative investors are fueling the current demand in search of fast profits, that could evaporate just as fast. This would put the price on dangerous grounds, completely exposed to a terrible correction.
I know many of you are excited about XRP’s potential. First, it would be a game-changer for real-time settlement, in the emerging global financial architecture for digital assets. This use case is compelling, as it addresses a real-world problem: slow and expensive cross-border payments. XRP is not the only competitor in this area. Other cryptocurrencies such as Stellar (XLM) and even old-school payments systems are jockeying for position. So fierce is the competition that XRP’s success is by no means assured.
Ripple’s lawsuit against the SEC has finally settled — sort of. This turn of events has sent the XRP community into a frenzy of joy and positivity. We believe this kind of regulatory clarity is very important for the long-term viability of any cryptocurrency. This legal victory doesn’t wipe away all regulatory worries. The cryptocurrency landscape is more unregulated than most industries, and further regulatory measures could still be a danger to XRP’s future.
Despite all these good tidings, I still feel like all this good news isn’t quite enough to explain this latest price jump as anything but a bubble. Any XRP price prediction of $3.03 by May 2025, let alone $4.08 in five years – as some sites have suggested – sounds way too bullish. As these forecasts have done, they tend to gloss over the risks that come with cryptocurrencies. Market volatility, regulatory uncertainty, and intense competition from other digital assets may adversely affect their performance. According to Wallet Investor’s XRP price analysis, XRP is a bad long-term investment today and over the next year. Thus is born the speculation that always leads to the worst case scenario.
I think back to 2017, when I experienced the ICO boom as a startup founder. Projects who had nothing more than a whitepaper were able to raise millions of dollars, only to vanish months later. Fueled by the fear of missing out (Fomo), bad investment decisions were made, and thousands of investors were left holding useless tokens. I find a few disturbing similarities between that time and the present day hysteria over XRP. The hype is definitely real, and I’m petrified that a lot of first time investors are diving in without realizing just how risky this arena can be.
It’s worth looking past the headline, though, to consider the distinctly centralized nature of XRP. Not surprisingly, decentralization is a foundational ideal for many cryptocurrencies. Due to its greater centralization, XRP may be more susceptible to abuse or manipulation by one single party. Large XRP holders – often referred to as “whales” – have the potential to significantly manipulate the market. The results of their actions regularly send gas prices soaring.
Related recent price increases, like the 0.56% increase last month, have contributed an average of $0.0030 to the current value. This example is an illustration of how much speculation can drive short-term price movements. To put this in context, the average expected trading cost would be $7.24. This is consistent with speculation being a major driver of the net trading costs of XRP.
As an investor, I appreciate the potential XRP holds to help shape the future of finance for everyone. I am convinced that the current price increase is due almost entirely to speculation and hype. Admittedly, investors should be wary and not succumb to the hype and excitement. Before you invest in XRP or any cryptocurrency, always do your own research. Know that it’s risky and don’t invest more than you can lose.
Instead of just chasing the hot new thing, look at each one, really think about the underlying trends, and weigh the negatives. Avoid letting FOMO get the better of your decision-making. A healthy dose of skepticism is always a good thing in the volatile world of cryptocurrency.
