XRP Is Decreasing Along With Bitcoin, But for Its Own Reasons and for a While

XRP Is Decreasing Along With Bitcoin, But for Its Own Reasons and for a While

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For a long time, the Ripple cryptocurrency XRP differed in dynamics from other leading cryptocurrencies. XRP hasn’t even always been correlated with bitcoin or the market in general.

Recently, however, the XRP chart is similar to the BTC chart. And now that bitcoin has dropped, XRP is also showing a decline. However, there is reason to believe that the XRP is decreasing due to its own reasons, and not as a reflection of the BTC correction.

For a long time, Ripple has been unsuccessfully seeking official recognition from the US authorities. After they had allowed bitcoin transactions, it seemed that this goal was achievable. But recently it is reported that, on the contrary, the authorities try to recognize the XRP token as a security, which requires a license to buy and sell it. This will significantly worsen the rate of the third cryptocurrency. But the biggest complaint about XRP from investors is that more than half of the tokens are owned by Ripple. And it’s not about the notorious problem of 51%, but about the fact that, if necessary, the company can sell a significant amount of tokens and thereby collapse the price of XRP.

Santiago Velez, co-founder of the development company Block Digital Corporation, analyzed this situation and how it could affect the dynamics of the asset price. The expert notes that the concentration of XRP tokens in one company is akin to the accumulation of bitcoins from the so-called “whales” who own large amounts of cryptocurrency. Typically, when the whales sell an asset, the market crashes. But Ripple is trying to be transparent as for holding XRP tokens. The company keeps all of its tokens in escrow accounts and releases a limited and well-known number of tokens on the market. Velez states:

“For me, XRP is one of the ecosystems that’s the most transparent. The fact that Ripple even communicates this to the community, they have no obligation to do so. They had no obligation to put these XRP into these escrow contracts, but they did so anyway, and they report exactly how much they print out, how much they sell.”

A recent analysis by CoinMetrics has fully confirmed that the XRP ecosystem is performing exactly as announced.

On the other hand, Velez notes that it is incorrect to compare XRP and BTC. XRP does not seek to become the digital counterpart of gold as bitcoin does. Therefore, XRP’s price is more dependent on its utility. Currently, this utility lies in the ODL (On-Demand Liquidity) platform, which is made for fast and cheap global payments.

It is also important that Ripple’s throughput is significantly higher than that of the bitcoin blockchain. It is 1500 TPS, while bitcoin really only has 3-4 TPS. But that may change when the Ethereum update with the claimed 100K TPS throughput will be finished.