xrp crypto value

Yes Ripple Is Pricey, But it Has a Clear Business Model

Ripple (XRP) Crypto News: Why XRP Prices Are Gaining Today
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ripple (CCC:XRP-USD) is trading around $1.40 and is up 600% in 2021 as it was trading in early January 2021 around 24 cents. XRP is on an interesting path now, with the SEC suing, and the need to prove its business prospects and value as well.

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Should you be thinking about Ripple now?

After all, it is the fourth largest coin as of May 4, 2021, with a market capitalization of $65.73 billion according to CoinMarketCap.

Not all cryptocurrencies are created equal, and some are just hype with pure speculation. Ripple is also a very speculative currency, but it has a strong business model that makes it interesting.

future eyes ripple

XRP describes itself as a “new era of finance” with interest towards financial services. The strength of RippleNet rests on three pillars. An updated decentralized messaging infrastructure with 0% failure rate and fluidity solutions. Ripple wants to be a global payments business solution. Or, as it states, “the financial network of the future.”

The exciting thing about Ripple is that it has succeeded in building a large network of financial institutions to strengthen and develop its business model.

Banco Santander is just a large international bank that is a major trading partner of Ripple. The news that the world is converging on a new global standard for modern cross-border payments, ISO 20022, is also noteworthy. And Ripple is already part of the ISO 20022 standards body.

XRP is designed for international trade, with the main concept being faster and cheaper currency conversion and international payment settlements. In theory, this is a business that has a great opportunity. Money transfer is a huge global market.

But there is a big challenge.

Ripple’s biggest competitor is the SWIFT messaging platform. A system that banks and other financial institutions have used for decades, and will likely continue to use in the future. Therefore, Ripple faces stiff competition from the highly regulated traditional banking system.

I’m not sure if this competition with the traditional banking system will go well or badly in the future. Speaking of problems, there is also a second major issue for Ripple now.

SEC speaking

On December 22, 2020, the Securities and Exchange Commission alleged an “unregistered securities offer” involving the company.

The agency said:

“The Securities and Exchange Commission… has announced that it has filed a lawsuit against Ripple Labs Inc. and two of its executives, who are also significant holders of securities, alleging that they have raised more than $1.3 billion through an unregistered and ongoing securities offering of digital assets. “

Co-founder and former CEO Christian Larsen and CEO Bradley Garlinghouse are named in the SEC complaint. The Securities and Exchange Commission said they “raised capital to fund the company’s business”.

In a regulated financial and investment industry, a Securities and Exchange Commission (SEC) complaint is a cause for scrutiny. What is interesting now is the outcome of the lawsuit. There has been some positive news about Ripple, which has helped its rally this year. But is this gathering sustainable?

I would argue that after a 600% gain in 2021, the temptation to guarantee big profits is justified and could lead to a ripple sale. It can be temporary, or it can last longer. The catalyst now, of course, is the SEC lawsuit and its outcome. Any forecast of the Ripple price should be taken with a lot of caution and uncertainty.

Currency or security?

Can you classify Ripple as collateral? This is important because if you can, the SEC lawsuit could have more legal negative effects on Ripple. The Securities and Exchange Commission recently responded to Ripple’s efforts to dismiss the lawsuit.

An interesting precedent that attempts to determine whether any cryptocurrency is security or not. It is known as the Howey test, and the standard is used globally. Factors include whether there is an investment of money, if it involves a joint venture and an expectation of profit “from the managerial or entrepreneurial efforts of others”.

Investing in cryptocurrency is risky, and there are no guarantees of any profit. But at the same time, even for speculative purposes, if you invest money in Ripple, it is assumed that the intent is to gain and not lose money.

Additionally, if we focus on Ripple’s business model, there is a clear entrepreneurial effort by its management.

Bottom line ripple

Ripple is an interesting case in the cryptocurrency industry. I love its working model and utility. Ripple has a strong utility that adds value. But this does not mean that the price of Ripple is cheap after its 600% increase in 2021. Its price can go up, but it is also lower.

Be careful and watch her news. Additional due diligence and your risk tolerance should always be assessed before investing in Ripple or any other cryptocurrency.

At the date of publication, Stavros Georgiadis, CFA (directly or indirectly) did not hold any positions in the securities mentioned in this article.

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