Why I’m Skeptical of Ripple’s XRP
Whenever Ripple XRP is mentioned in cryptocurrency circles it receives either illustrious praise or intense criticism. Many propose it is the future of banking and international money transfers, while others claim its centralization and high volume will limit its growth.
My rule on crypto investing is that once the general public notices I prepare to sell; if Grandma wants in I want out. This may seem counterintuitive — the more people buying the higher the price, but cryptocurrencies weren’t originally made to be traded like stocks.
Let’s take a closer look as to why XRP was doomed from the start.
Despite the news, banks will never use XRP.
Ripple’s founders will love to tell you about the high-profile deals they are conducting with banks around the world, particularly in Japan and South Korea. But what they conveniently leave out is that these banks plan to use Ripple’s revolutionary software but not XRP. On the flip side, Moneygram recently announced a partnership with Ripple and an agreement to use XRP in payment flows. In my opinion, Ripple’s marketing is borderline fraudulent, and the motives seem painfully obvious:
Ripple’s founders hold the majority stake of XRP.
Chris Larsen — the co-founder of Ripple — holds more than 5 billion XRP, and as a whole Ripple possesses more than 60% of the total coins. This put his net worth at nearly $60 billion at XRP’s peak, so increasing the price of XRP is in his best interest. As we speak, 55 billion XRP currently sits in an escrow account owned by Ripple, and they have the ability to sell one billion every month.
When Ripple crashed 74% Larsen lost around $44 billion in net worth.
I am not accusing Larsen or Ripple of insider trading, although I do believe they are misleading potential investors for personal benefit. In addition, Larsen alone has the ability to tank the currency in an instant by selling his holdings, and with the anonymity of cryptocurrency he could possibly get away with it question-free.
Cryptocurrencies are decentralized for a reason.
The main framework behind cryptocurrencies is the blockchain, which is operated and maintained by miners on the network. This decentralized system allowed Bitcoin to enable anonymity and compete with banks by completely avoiding them.
XRP’s value seems to be tied directly to the bank deals of Ripple, which is counterintuitive to the purpose of cryptocurrencies.
Consensus
In my opinion, it seems like most crypto investors now are doing it as a “get rich quick” scheme. Many saw the tremendous returns enjoyed by early adopters of Bitcoin and wanted in on the profits but don’t realize that it may very well be too late. Stories have surfaced of people taking out business loans to buy Bitcoin, and quite frankly, we should be far more worried. Nearly every financial crisis in history has been caused by over-speculation and if the crypto bubble bursts we might witness another economic depression.
Although Ripple’s XRP has seen some tremendous improvements and astronomical gains, but it should be treated as a currency. Not a stock.
Disclosure: I own a small amount of Ripple XRP. I only advise investing in XRP if you are okay with losing the total amount in the possible event of a bubble burst.
