Enthusiasm for cryptocurrency may be growing again. But it is far from enough to save ripple (CCC:XRP).
It was halted late last month due to news of the cryptocurrency and its developer, Ripple Labs, was in the crosshairs of the organizers, has not recovered yet. Even Bitcoin (CCC:BTC) And Ethereum (CCC:ETH) Rush to new highs.
However, do not view this as an opportunity to buy this alternative digital currency at a cheap price. Bitcoin’s rising tide won’t do much to raise its bar. but that is not all. As soon as the Ripple is launched Queen PieceExpect prices to continue to the downside.
So, what’s the verdict, as the altcoin is trading around 23 cents? stay away. But even though I prefer other cryptocurrencies, it is wise to remain cautious as this asset class is still hot. Even as institutional investors are ready to use bitcoin as a hedge against the dollar’s decline.
This does not mean that you should avoid this asset class entirely. I personally own a small Bitcoin position, and intend to remain a ‘HODLer’. But, as cryptocurrencies could crash again as they did in 2018, caution is still the best approach.
The Rising Tide of Bitcoin Can’t Save Ripple
Simply, don’t look at the contrast between the epic rise of Bitcoin, Ethereum, and Litecoin (CCC:LTC), and XRP (Ripple) continues to underperform as a bug. Cryptocurrencies may be a wilder Western market than stocks. But Mr. Crypto Market knows what he’s doing.
They are pricing this underperforming cryptocurrency appropriately. why? Mainly, due to Securities and Exchange Commission (SEC) investigations. In short, the SEC claims that the ongoing sale of XRP constitutes an offer of unregistered securities.
Why is Ripple an “unregistered security” while Bitcoin and other digital currencies are not? Investor Josh Enomoto broke it up on January 5th. Simply put, while other major cryptocurrencies are created by (open source) mining, this is not the case with this crypto.
Instead, the developer controls the rendering. Completely decentralized, this factor leaves XRP vulnerable to scrutiny in securities law. Given that the investigation has only just begun, it’s still too early to tell if the SEC is effectively “eliminating” the altcoin, or simply penalizing its developer.
But, regardless of the SEC’s final action, don’t buy hard-hit Ripple hoping for an epic recovery. Coinbase is removing it from its platform. As other exchanges are following suit, XRP’s days as a major digital currency are numbered.
Expected Coinbase Commentary and XRP Stock
Besides the SEC investigation, the upcoming Coinbase comment is another bearish factor for Ripple. Enomoto touched on this in his recent writing as well, referring to a Bloomberg article detailing the exchange’s recent announcement that it was suspending the sale of XRP on its platform due to related litigation.
Coinbase was already limiting trading late last month, and plans to completely suspend XRP from its platform on January 19. How bad is this for future price movements? If trading is suspended on other platforms, expect prices to continue to drop.
While major investors have been feeding the recent crypto bubble, retail investors are still making a difference. And if retail investors can’t buy it easily, demand will continue to fall.
In short, there is no good reason to subscribe to Ripple at today’s prices. Regulatory audit still needs to be played. However, Coinbase’s recent actions have already “eliminated” XRP. With this in mind, those looking for exposure to cryptocurrencies should stick with Bitcoin, Ethereum, and Litecoin. And stay away from this lackluster altcoin.
However, investors in general should be careful if they have not yet entered the crpyto market. While there is a clear long-term bullish case for bitcoin, it is clear that this asset class is in the midst of a bubble.
Certainly, “it’s different this time”, led by institutional investors, not individuals. But this does not guarantee that this volatile asset class will not be disrupted again.
Conclusion: Treat Cryptocurrencies with Caution and Avoid XRP
While the verdict in the SEC investigation is still a long way off, the verdict on cryptocurrency Ripple is clear: Avoid. However, as I mentioned above, this does not mean that you should chase bullish momentum in Bitcoin, Ethereum, and Litecoin.
There may be some rationale for JP Morgan’s extremely bullish $146,000 bitcoin price. Institutional investors continue to warm up for bitcoin. As CNBC reported on December 18, it was the big bitcoin buyers, not retail investors, that were behind the recent rally.
However, the move of smart money does not mean that this asset class is immune to another 2018-style crypto meltdown. I plan to continue holding my bitcoin position. But, given the high volatility of cryptocurrencies, it is best to remain cautious, and not bet on the farm.
Conclusion: If you have exposure to cryptocurrency, maintain your current positions. If you want to get exposed, buy with caution in high-quality names like Bitcoin, but above all stay away from Ripple.
As of publication, Thomas Niel has held a long standing position in Bitcoin.
Thomas Neal, a contributor to InvestorPlace, has written one stock analysis since 2016.