In this article we will dive deep into XRP and clear up all the questions and concerns that an investor might have regarding this fascinating crypto currency.
Cryptocurrency space is already a minefield of risk and lurking danger. If you’re wondering if XRP is a good investment, it’s very important to understand everything about XRP and Ripple before you choose to pull the trigger or move to a more viable project. Knowledge is the only way to limit risk, so let’s take a look at XRP and help you figure out what’s what.
Ripple and XRP. What’s the difference?
The most confusing topic regarding XRP and Ripple ( that most investors in the crypto space fail to understand ) is that Ripple is NOT the same as XRP. Ripple is a physical company that builds solutions for FINTECH that will ( hopefully ) help to streamline oldschool processes and ways of transacting value across the globe and giving the classic remittance services ( like Westen Union ) a run for their money.
XRP on the other hand, is an open source cryptocurrency that has a high transaction throughput and works in a very fast and seamless way. It’s extremely important to know that most XRP that were issued is still directly owned by Ripple labs.
No doubt that you’re reading this article because of the gargantuan shitstorm that XRP has caused in the crypto community. Armies of keyboard warriors, influencers and digital lobbyists are causing uproars and swells of emotions across cyberspace. Nevertheless for the sake of objectivity it’s crucial to know all the fine details regarding this fascinating case. This way you will not only be a much more knowledgeable investor, but you will also learn new methods of conducting your research for that next 100x gem that will hopefully bring a handsome profit during this bull market. Let’s roll up the sleeves and conduct a short archeological digging expedition into XRP.
How it all began.
When money moves across the globe slower than an Express DHL package, you know that there’s a business opportunity to make it faster and even cheaper. This is exactly what Chris Larsen, Jed McCaleb, Arthur Britto have set out to tackle. In 2012 Ripple saw the light of day. The challenge was to provide a better, faster and cheaper solution ( mainly for large players like companies, banks and governments ) to conduct their global wheeling and dealing. The SWIFT system is not only slow as hell, it’s also expensive, since all the players in that network nibble away at the money you’re trying to send.
Just imagine that a 1 km long freight train is entering the SWIFT “tunnel” only to realise that it has lost many train cars filled with precious cargo on the other end of this tunnel. The precious cargo ( ie. your money ) have been redirected to the owners of that tunnel simply because they own the damn tunnel and because this is the only road that your train can take. Ripple wanted to make sure that only a fraction of 1 train car of cargo went to these owners instead. A noble idea at the time for sure, especially considering that the XRP network can process 1500 transactions per second at the cost of approximately 0.0001 XRP. This alone definitely smells like financial disruption for the old and rusted banks and credit card companies.
Ripple labs have created 100 billion ( yes 100 with 9 frigging zero’s behind it ) XRP tokens, but ensured that 80% remained under the iron fist of the company at all times. The other 20% of this handsome bounty went to the 3 musketeers who started it all: Chris, Jed and Arthur. So as you might have predicted, this ruffled the jimmies of many cypherpunks and programmers who live by decentralisation ( and a fully level playing field ) until this day. One can say that from the very beginning XRP has become that rich kid in a poor neighborhood school. No student ( from the crypto community ) took kindly to this kind of self enrichment of the founders.
After the token distribution, the 25% of the company owned tokens were unleashed upon the open market and started to trade. People can say what they want about Ripple, but these guys surely know a thing or two about marketing, because many exchanges were eager to list XRP and start trading. Aside from the frantic speculation ( mostly due to the red hot bull market of 2017 ), Ripple labs did some lucrative acquisitions of companies. Moneygram is one of the examples. The deal was to have Moneygram use Ripple’s tech for making global remittance services better, faster and cheaper. Even the talking heads of CNBC did tutorials on how to buy XRP. People who remember the 2017 bull market will marvel at the greed and gargantuan profits made and lost that year.
What’s perhaps also interesting to mention, is that Ripple ( company ) did their best to finance their operations by selling XRP. One might say that it’s a standard operating procedure for any ICO ( Initial Coin Offering ), but not all was sugar and honey in the land of cheap and lightning fast transactions. Things were bound to go wrong and sure as hell go wrong they did.
What the hell happened?
During the period when investors and cryptocurrency projects were finally having a massive hangover from the irrational exuberance and gorging from the 2017 bull cycle, the crypto market suddenly took a nosedive of a brutal 80 ( and in some cases even 90 ) percent that caused many people and projects to sober up very quickly. Suddenly it became evident that we saw a huge speculative mania playing out. A dotcom 2.0 craze of sorts. Many hopeful ICO projects and even cryptocurrencies were wiped out, while miraculously XRP and Ripple labs stayed afloat and even continued their conventional practices.
The simmering cauldron of trouble finally came to a boil with the first class action lawsuit against the company Ripple labs after this grueling bear market. Investors smelled trouble and wholeheartedly accused Ripple of tanking the price of XRP by dumping large amounts of the tokens onto the open market on a regular basis. If you have 80 billion and only 25 billion is on an open market, that leaves plenty of wiggle room for having a nice financial cushion at the expense of the investors, especially during a turbulent period of bleeding numbers of the bear market. Talks of XRP being a security also started to get louder.
The ship that is Ripple labs and its captains ( Brad Garlinghouse and Chris Larsen ) came under legal fire. Saying that this caused a true fecal tornado in the crypto space would be an understatement. Fortunately for Ripple labs they are not only armed with a swamp of loyal XRP investors, but they also keep an army of suit and tie wearing legal gladiators that can defend their interests in court.
2020 has given us a rotten year. But even the global Corona hysteria, lockdowns and descent into the Mad Max dystopia hasn’t tarnished the upcoming bull market in the cryptocurrency space. Just when the dedicated HODLers and investors thought that things are finally getting better, lightning and thunder has descended upon XRP once again in the form of the Securities and Exchange Commission of the US. Let’s dive into it.
Who screwed up and how?
A very wise investor once said: “There’s never just one cockroach”. That means when the company you are investing in screws up in a big way, you can rest assured that they will do it again and again, reflecting their performance in the value of their publicly traded shares.
Same goes for Ripple labs, the CEO’s and off course the XRP token. Even before the SEC had unleashed their furious wrath upon Ripple, there were early warning signs. Let’s explore what we know and what you can look for in the future.
First and the main point of the beef that the SEC has with Ripple labs, is the fact that Ripple is using XRP as a security. It failed the 4 point Howey test whereby any asset is thrown upon the scales and finally defined what kind of a beast it is. We have to mention that Bitcoin and Ethereum have also been through the Howey test meat grinder. After concluding that they are ‘sufficiently decentralised” the US courts ruled that these 2 are in fact NOT securities like stocks and bonds. The same can’t be said about XRP simply because Ripple labs OWNS XRP and uses it for their own enrichment by selling it to the investors. In fact they have done this since the beginning when XRP was released into the wild. A big nasty cockroach has just crawled from under the fridge. Yikes!
Ripple labs has also known about the huge amount of interest that the SEC had towards their activities since April 2019. This information has been conveniently kept from the investors that held XRP and rode it down during the prolonged bear market cycle. Even the leading crypto investment firm Grayscale has ostracised XRP from their portfolio. Another creepy crawler has just shown his head from under the kitchen sink.
To make matters worse, there were some early warning signs that diligent investors noticed and are very important to mention. First of all in late November 2020 Brad Garlinghouse had considered a “hypothetical” case where Ripple would indeed have a beef with the SEC. That was off course before the news of the court case was made public. Second, in early december Ripple labs have considered “burning” 48 billion of XRP tokens as an “experiment”. But the cherry on the top was of course the fact that Ripple labs have sold their stake in Moneygram. A whiff of bullshit lingered over Ripple for a while before the lawsuit struck like thunder on a sunny day.
When the news finally hit, the SEC was adamant and the allegations were impressive. It comes down that Ripple labs if being accused of being an unregistered security and that Ripple labs actually has no viable means of income if they didn’t had XRP token to dump on investors and that Ripple has defrauded the investors world wide by clever tricks like: manipulating the price of XRP ( to the point of releasing good news during the red days of XRP’s price action ), selling XRP tokens to insiders at 30 to 40% discount ( guaranteeing immediate profits ) and many other juicy allegations. And suddenly just like that, the spotless kitchen became a breeding ground for a whole swarm of cockroaches.
Is XRP a good investment?
Some see XRP as having just another dip ( and we all know in crypto space that dips and dumps are the same as a black friday prices for assets ), others however see XRP as a ticking time bomb. This is exactly how most exchanges reacted upon hearing the shock wave of the SEC’s nuclear blast hitting the XRP’s ( already laggy ) price action. The token has been delisted on most exchanges and remains in a lingering state of anticipation. The result of the court case will decide its fate, however the exchanges ( who had their share of the US law in the past ) are being cautious.
The question of what kind of investment XRP might be is the age old question of risk. Every investor has to make out for himself if XRP will have a future, or will it be gutted by the SEC? After all, their demands are; hefty fees for the sale of unregistered security, ban on the sale of the XRP token and even ban on the CEO’s from participating in any future Initial Coin Offerings. The SEC doesn’t screw around and it’s showing this dog that he needs to get off the couch and back on the rug by the door as soon as physically possible
To add insult to injury when the CEO’s of Ripple declared the SEC’s court case as an “attack on all cryptocurrencies” they have been diagnosed with a sort of leprosy and banished from the cryptocurrency community, who knows their decentralisation and blockchain tech like no other and off course don’t take lightly to centralised beasts like XRP. It surely will take a while until the bureaucratic meat grinder of paperwork and allegations is cleared up and we see the final result of this case. Until then the investor should dive deeper into the SEC allegations and see who’s opinion carries the most weight. Armed with this information the choice to invest or not will be clear. As of now the risk of XRP is outweighing the rewards for long term investors. Speculators on the other hand are off course most welcome to take a short term ride on XRP’s roller coaster, since the price is extremely volatile.