Digital assets are facing fabulous growth. The news is filled with quotes, trends, and incredible investments in the blockchain industry. Upon entering the cryptocurrency market, many traders are curious and a bit baffled. Questions arise concerning various assets, systems, and digital transactions that they do not understand.
How is Ripple different from Bitcoin, Ethereum, and everything else on the crypto market? How did this cryptocurrency appear? What makes Ripple so convenient for cross-border payments? How do you interact with it with the greatest benefit? We’ll answer all these questions in this comprehensive guide.
What Is Ripple?
Ripple is a system of cross-currency payments created by the company Ripple Labs. In short, it’s a digital payment network based on blockchain technology, which works on a specially developed protocol. It specializes in instant money transfers all over the world.
Out of all crypto, Ripple is the most integrated within the global financial market. The internal cryptocurrency of the network, XRP, provides financial institutions with fast and reliable means of receiving liquidity. It is consistently included in the top ten largest cryptocurrencies by capitalization.
In total, more than 70 payment systems and 90 banks have collaborated with Ripple, including American Express, Santander, Bank of America Merrill Lynch, Barclays, and Royal Bank of Scotland.
Ripple has technical elements that are designed to simplify the processing of transactions and speed them up while remaining safe and secure. Usually, Ripple and XRP are treated as synonyms, most often referring to the cryptocurrency.
History of Ripple
Ripple was first worked on back in 2004 but was not launched until 2012. Its author, Canadian programmer Ryan Fugger, called his brainchild “RipplePay.”
Since its emergence, Ripple has set an ambitious goal to become the successor of Visa, MasterCard, and other international payment systems. New technologies (in particular, blockchain) helped to improve RipplePay.
The typical purpose of the innovative instrument was to eliminate intermediaries and avoid fees. People were getting frustrated with banks: besides being expensive, transactions were slow. When working with intermediaries, people had to pay fees for every transfer and wait for days.
Ripple aimed to set up independent servers around the world that would interact and verify financial transactions. If they agree upon the validity, the transfer will go through within seconds — even international transactions. The network is ready to process up to 15 thousand transfers per second, making it much faster than working with an intermediary.
Ripple’s commission for transfers is only 0.00001 XRP, and it is not used for earnings since all points received for transactions are eliminated. The purpose of the commission is to protect the network from DDoS attacks. At the current price of XRP, one transaction will cost the sender a negligible amount.
XRP is now a full-fledged cryptocurrency in which you can invest, send payments, and exchange for other currencies. At the beginning of 2021, it had a market capitalization of about 10 billion USD. And the market cannot help growing, so in 2022, the capitalization has exceeded $39 billion.
It is important to note that Ripple has competed with Bitcoin since 2014, but it has only recently gained real popularity. Ripple prices have fluctuated, but they are still comparatively cheap.
What are the Differences Between Bitcoin and Ripple?
BTC was a pioneer, a test pilot of completely new technology, while Ripple was an innovation based on what Bitcoin has already invented.
The first cryptocurrency, Bitcoin, is digital money that works without a regulator and state participation. There is no one responsible for the currency. In contrast, despite Ripple Labs initially claiming XRP as a decentralized system, the company owns a large number of tokens, giving it more control over the situation.
Bitcoin is an influential leader in the crypto industry. It’s unstable and risky, but having BTC in your digital wallet or mining it can bring a lot of money. Ripple is cheap and convenient, and it’s useful for operations and transactions. As such, it is a low-volatility and low-yield currency.
XRP is impossible to mine because 100 billion tokens were released in advance. However, the developers immediately froze 60%. To satisfy the growing needs of users and the stability of the value of the coin, the creators release an additional 1 billion coins into circulation once a month. You can’t introduce new XRPs to the circulating supply because all of it is already circulating.
Unlike Bitcoin, Ripple did not claim to be the replacement of the US dollar in the global economy. Its purpose is to enable the instant exchange of assets. The key difference is you don’t need virtual currency to make payments through Ripple. You can use various universally-known currencies, but this is also possible through using the XRP coin.
What Moves the XRP Price?
XRP is best known for its record growth in 2017. That year, Bitcoin grew by 1000%, which made headlines. But XRP showed much better results with an amazing growth of 36000%. It traded at its highest value of $3.84 in January 2018, a massive improvement from its original value of $0.002.
The forces of supply and demand, as well as speculation activity, determine the price of Ripple. However, there are other influencing factors, including:
- Media interest acts as a booster of the price. We should pay attention to interest in the XRP coin and the popularity of cryptocurrencies overall
- Discussions about the company Ripple and its crypto asset. If it makes headlines on mainstream news channels, price fluctuations are more likely to occur
- The level of financial adoption. The use of Ripple in international transfers and its implementation into banking systems play key roles.
- The hostility of Asian countries, especially China, is incredibly influential.
The SEC Lawsuit
XRP lost 50% of its total value after the SEC lawsuit arose on December 22, 2020, falling from a monthly high of $0.66 to a low of $0.22.
The Securities and Exchange Commission made a case that XRP was not a currency but rather a security, mainly due to Ripple’s handling of it, and legal action followed. In December of 2020, the authority charged Ripple and two of its two executives with offering unregistered securities for $1.3 bn. The CEO, Bradley Garlinghouse, insisted that the SEC had no reason to sue Ripple and that XRP was a currency. As a result of the situation, the value of this currency plummeted.
After this big blow, other oversized wallets began plunging. Wallets with more than 1 million XRPs were at their lowest since October 2019. The former third-largest cryptocurrency has seen its value drop 75% since the lawsuit, and some experts predicted that XRP would be worse.
However, Ripple Labs took advantage of this chaos. At the beginning of 2022, XRP traded above 60 cents, and the business is diversifying, developing its capabilities and technologies.
On January 19, 2022, John Deaton launched a petition; it aims to give voice to token XRP investors. XRP investors outside the US have filed a petition to Congress for the SEC investigation. Deaton, the lawyer of 63,000 XRP investors, suggests that non-American investors should demand a Congressional investigation of the SEC. More than 17,000 people signed the petition, appealing to the US Congress to investigate the SEC for illegality and conflict of interest against Ripple Labs, which owns about 55 percent of the entire cryptocurrency volume. The petition states that foreign investors suffered as a result of the SEC’s lawsuit.
The lawsuit has been going on for a long time, and even today, the news is constantly updating. Every trader should follow developments very carefully to understand the possible price shifts.
Why Should You Trade Ripple?
Here are some reasons you might want to trade XRP:
- Exclusively designed as a payment platform, Ripple focuses on technological developments.
- Ripple is not as volatile as other cryptos.
- It has a significant market capitalization of over 39 billion USD
- Nearly instant transactions make it an attractive payment option.
- Due to high capitalization and acceptance, decentralized exchanges like Binance, KuCoin, and Huobi include XRP on their futures markets.
- XRP is seriously dependent on the news. Media coverage of the SEC lawsuit and collaboration with financial institutions have a significant influence on the price, which makes the price forecast easier.
Why You Shouldn’t Trade Ripple
- Ripple is subject to an SEC investigation, and many exchanges have delisted the token. It might be hard to trade it actively. As a result, XRP trading becomes less attractive — which then leads to less demand and a lack of liquidity.
- Many information security experts are concerned that the network is vulnerable to hacker attacks.
How To Trade Ripple?
Ripple trading can be divided into three steps:
Step 1: Open an account with NAGA
To start trading digital assets, you need to open an account on a trading platform. The registration process will depend on your country of residence. But proof of identity will be required for sure. The verification system called Know Your Customer (KYC) was created to avoid fake and illegal registrations (which could lead to the destabilization of the buying and selling process).
Step 2: Fund your account
There is no fixed sum when funding your account. Depositing money into an account is a personal matter for everyone, and you can start with a fairly small sum. Just enter the desired investment amount. Moreover, you can use a demo account to try out the platform without making a deposit.
Step 3: Trade XRP CFDs
Brokers offer CFD trading that allows traders to open long and short positions and trade on price fluctuations without owning a cryptocurrency. Open a position and use leverage if needed. It is possible to go long if the price is expected to rise — or go short if there are reasons for a downtrend. Keep in mind that leverage raises not only potential profits but also increases losses.
You can place market or limit orders. A market order will execute your trade at the current price. By setting a limit order, you can choose a certain price that is expected to be reached in the future. If XRP reaches that price, the trade will be executed.
Trade XRP against the US Dollar
The XRP/USD trading pair provides a good level of volatility, and the volume level ensures the fast execution of transactions. The response to the US dollar chart indicates that it tends to move in a trend for a longer period. Trading the XRP/USD pair is simple, as you can manage your risk with guaranteed stop-loss and take-profit orders, and advanced chart tools are also available for you.
Which Wallets Should I Use for Holding Ripple (XRP)?
There are several options for you. You can use either a hot wallet (software) or a cold wallet (hardware) to store your XRP.
A hardware wallet is an autonomous physical device that stores the private key to your XRP tokens. The keys are stored offline, which prevents online hacker attacks.
A software wallet stores the private key to your XRP tokens online, which means that you can access it from any device.
Online wallets make it possible to buy, sell, and keep track of any digital currency in one place. One advantage of online wallets is their simplicity in use. They are more accessible, as there is no need to switch from an offline wallet to an online one when conducting crypto transactions.
Hot wallets are also popular because they let you handle crypto through a mobile app. Meanwhile, using cold wallets isn’t as fast; it requires you to move assets to a hot wallet before making a purchase. Keep in mind, though, that hot wallets are less safe because they might be vulnerable to malware.
The most common software wallets include Binance, Coinbase, Crypto.com, and Paybis. Hardware wallets include Ledger Nano and Trezor.
Tips for Trading Ripple
Cryptocurrency investors need to take several important features into consideration to succeed in Ripple trading.
Risks and Money Management
Do not invest all your capital in one transaction, or else you’re putting your entire portfolio at risk. Use approximately 3-5% of the total capital for one trade.
Learn How To Analyze the Market
There are two options: technical and fundamental analysis. Fundamental analysis is based on world news, global market trends, economics and politics, and internal network news. Technical analysis, on the other hand, requires you to study charts, patterns, indicators, and capitalization volumes.
Determine Your Strategy
Carefully analyze how long you would like to trade for, and then develop a trading plan. Long-term strategies always require deep mindful consideration, while one-day transactions rely on speed and the willingness to pay close attention to the market.
Do Not Rely on Your Emotions
A large profit can lead to euphoria — which could then lead to an irrational investment of profit and subsequent losses. Similarly, a sharp decline in XRP’s price could destroy a trader’s self-confidence, causing them to sell at a loss. Many traders also experience FOMO; they fear missing out on profits and end up making unwise trades.
Ripple has a great history of development. It is less volatile than Bitcoin, which makes this asset safer for long-term trading.
Ripple has a faster network and fewer commissions; thus, it has prospects for trading and holding. Although it has problems with the SEC, it retains its price and can be promising for trades. It seems potentially beneficial to buy it in the middle of bad news, as it recovers quickly due to the supply and demand balance. XRP has one of the biggest capitalizations, making it more attractive to investors than low-cap tokens on the crypto market.
The history of Ripple shows that it is already poised to compete with SWIFT and Western Union in the international market. The undeniable advantages of cryptocurrencies will lead to the transition of the economy to a new stage of finance. Now, the process is only gaining momentum.