Are you wondering is Ripple a good investment for 2021? Or would you like to learn what the pros and cons of investing in Ripple are? Also, does the potential good of investing in Ripple outweigh the bad? Get ready to find the answer to the question is Ripple a good investment in this article
Table of contents
- What is Ripple ?
- History of Ripple
- Is Ripple a good investment: XRP Pros and Cons
- XRP Pros
- XRP Cons
- Conclusion: Is Ripple a good investment
What is Ripple ?
Simply put, Ripple is an international cross-border payment solution powered by blockchain. For this reason, the Ripple protocol is unlike any other existing cryptocurrency. In fact, it is Ripple’s unique utility that has enabled the top altcoin to withstand the US Security Exchange Commission (SEC) lawsuit. But, how did it all start?
History of Ripple
Is Ripple a good investment depends on the blockchain’s origin. Computer programmers Chris Larsen and Jed McCaleb co-founded and launched Ripple Labs Inc in 2012. Notably, Ripple Labs Inc is the US-based parent company that holds RippleNet, XRP, and Ripple Labs. Notably, Ripple Network or RippleNet is the blockchain’s digital payment network for financial transactions.
Ripple aims to simplify financial payments because the traditional financial payment system is fragmented and complicated. As such, transfers that should only take minutes often take days instead. Ripple, however, offers a faster, cheaper, and more secure alternative. For instance, the blockchain payment system processes cross-border payments instantly for a nominal fee.
In 2014, MIT University researchers named Ripple Labs one of the top 50 Smartest Companies. The Massachusetts Institute of Technology (MIT) is a private institution that launched in 1861. The university focuses on scientific and technology research. Also, MIT is currently the top-ranking university based on QS Global World Rankings.
As such, Ripple revolutionized the financial system. In fact, by 2019 over 200 financial institutions had joined the Ripple ecosystem. To date, over 300 institutions across 40 countries use RippleNet. Examples of RippleNet users include American Express, Santander, and global money transfer giant MoneyGram.
At its growth rate, Ripple could overtake SWIFT and become the leading solution for secure, standardized, and reliable cross-border payments. However, all this promise almost got derailed when the SEC filed a lawsuit against the blockchain in 2020. Still, the company emerged unhurt from the controversy.
Is Ripple a good investment: XRP Pros and Cons
Before we proceed, another important consideration when answering is Ripple a good investment in 2021, is weighing its pros and cons. Let’s take a look at how XRP’s pros and cons stake up.
Here are a few reasons why Ripple is an attractive investment for 2021.
Ripple’s XRP is currently trading at $0.65 per coin at the time of writing. Which makes it grossly undervalued thanks to the current litigation and general market crash. In fact, this price is 80% down from XRP’s 2018 all-time high of $3.40. Some analysts believe that due to its high utility XRP could surge past $1,000 within the next ten years.
Also, considering how well the altcoin has weathered the current bearish market and litigation it’s clear that XRP is a strong token that’s undervalued and with high mainstream appeal.
As such, right now XRP is a low-risk investment with potentially big returns.
Ripple solves problems and creates opportunities. For example, the protocol solves a critical problem for financial institutions. XRP also speeds up the flow of capital which has vast potential to stimulate economic growth. Specifically, if small businesses use Ripple, they would instantly gain access to a global financial ecosystem. Thus, Ripple has wide use and is useful to a wide spectrum of users.
High Market Cap
Ripple has a market cap of just over $30 billion. In addition, based on market cap size Ripple ranks 7th out of all existing cryptocurrencies. Plus, Ripple has a current 2.16% market dominance. A strong market cap is a sign of high investor confidence, this confidence will help XRP ride out the current turbulent waves.
More Than the Average Crypto
Ripple is not just another cryptocurrency, this is because it is a company. In fact, Ripple Labs Inc has over 500 full-time employees based across the world. Ripple staff includes experts in marketing, public relations, and other business fields.
Key Strategic Partnerships and Investors
Ripple has some of the best partnerships and investors in the entire crypto market. German bank Fidor was the first major bank to partner with the crypto protocol in May 2014. Despite the current SEC litigation the protocol has continued growing its ecosystem to include partners like Egypt’s largest bank National Bank of Egypt and Lulu Financial Holdings.
Although the lawsuit cost Ripple some partners like MoneyGram. Other partners like American Express, Santander, SCB, and others opted to honor their partnership. Another sign of how strong the support behind the protocol is.
Moving Into CBDCs
Central bank digital currencies (CBDC) are a hot topic right now. This is because several governments are either exploring or developing CBDCs. For instance, China is currently promoting its digital yuan, while the Bank of England recently published a report on the impact CBDCs could have on the financial sector.
In March 2021 Ripple announced that the protocol was piloting the creation of private ledgers based on the public XRP ledger. If successful the ledger will handle tens of thousands of transactions per second. The project could even surpass 100 of thousands of transactions per second. As a pioneer, the XRP ledger could later be used by banks and financial institutes to develop their own ledgers.
Weathering a Legal Storm
Ripple is currently in the middle of an SEC lawsuit, as previously mentioned. To clarify, in December 2020, the US Securities and Exchange Commission (SEC) slapped Ripple with a 71-page complaint. The regulatory authority claims that Ripple illegally sold about $1.3 billion worth of XRP to raise funds.
Further, the SEC claims the XRP tokens meet the securities classification criteria. As a result, the SEC is handling the assets as securities and not cryptocurrency, which the regulatory body does not currently have jurisdiction over.
The SEC lawsuit triggered an XRP price dip that the altcoin is still recovering from. However, the SEC’s case seems weak and there is growing hope that either Ripple will soon win the case, or that the parties will settle soon. This expectation is driving XRP up with the altcoin likely to surge once the case is closed.
On the other hand, it’s not all roses for the battle battered altcoin. Here are some of the cons that could make you ask is Ripple a good investment?
Already Reach Max Supply
XRP tokens were pre-mined and are already in circulation. In comparison, most blockchains release their token supply over time. For example, Bitcoin has a max token supply of 21 million with 18,741,768 currently in circulation.
Having a limited supply helps keep cryptocurrencies deflationary. It also serves to help drive up crypto prices as the token utility and adoption increase. In turn, this could mean huge investment returns for early investors.
Ripple Execs Own A lot of XRP
Ripple co-founders Chris Larsen and Jed McCaleb both own a significant amount of XRP. In addition, Ripple CEO Brad Garlinghouse and other senior board members own a lot of XRP.
With so much XRP concentrated in one place, there is a fear that its price is inflated. Chris Larsen is also Ripple chairman while McCaleb has since moved on. Notably, McCaleb has often made headlines for dumping massive amounts of XRP and driving the altcoin’s price down.
Not Truly Decentralized
Blockchain purists do not consider XRP a true crypto as Ripple is not decentralized and autonomous. As previously stated, Ripple is more like a company that aims to solve problems with the financial sector. This goes against the principle of anonymity and disruption that Satoshi Nakamoto outlined when he created and launched Bitcoin and blockchain.
Ripple’s tokenomics is problematic. This is not only because all of the blockchain’s tokens are already in circulation. But also because they are concentrated within Ripple itself. For instance, Ripple chairman and co-founder Chris Larsen currently holds almost a third of XRP’s max supply. This also goes against decentralization and gives credence to the SEC’s accusations.
Currently, the largest international payment system is SWIFT. Over 11,000 financial institutions trust SWIFT to facilitate their cross-border payments. In addition, the banking sector is notoriously tech and change-averse. As such, Ripple has a lot of barriers to overcome to replace SWIFT.
Ongoing Court Case
As previously mentioned, Ripple is currently fighting an ongoing legal battle against the SEC. As such, the outcome is still uncertain. Growing calls for tighter crypto regulations could lead the SEC to make Ripple an example.
Ripple Is Not XRP
Although Ripple and XRP are used interchangeably, the two are actually not the same thing. In fact, XRP is only one of the many products offered by Ripple. In addition, many Ripple products and services do not utilize XRP. As such, the growth of Ripple partnerships and ecosystem does not equate to a rise in demand and XRP use. Thus, XRP price is not an accurate representation of Ripple’s success.
Conclusion: Is Ripple a good investment
Finally, is Ripple a good investment in 2021? In other words, do the risks of investing in Ripple outweigh the rewards? Actually, all investments bear some risk, more so crypto investments. However, from this analysis, it is clear that although Ripple does hold some risks, the potential rewards are hard to ignore.
Also, Ripple still has massive growth potential. The blockchain has proved this by its ability to onboard new partners in spite of its current legal problems.
In addition, the current price of XRP makes it optimal for new entrants as the token is currently undervalued. However, it is always wise to never invest more than you can afford to lose when investing in crypto.
Disclaimer: The views and opinions expressed in this article are solely the author’s and do not necessarily reflect the views of CoinQuora. No information in this article should be interpreted as investment advice. CoinQuora encourages all users to do their own research before investing in cryptocurrencies.