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XRP, the fourth largest digital asset by market value, was excluded from the 2020 cryptocurrency rally, marking the second consecutive year of underperformance against its biggest and most popular rivals, bitcoin and ether.
The token fell 2% in 2020, while bitcoin rose 30% and ether, the native token of the Ethereum blockchain, gained 76%.
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Cryptocurrency analysts and investors say XRP is likely underperforming this year due to regulatory pressure, slow growth as a payment solution, and a lack of classic proof-of-work mining that generates new supplies for the commercial market. Those downsides outweighed the bullish factors that include a slower sales pace by software developer XRP Ripple and signs of progress in a partnership with payments transmitter MoneyGram (NASDAQ: MGI).
“Even during this recent cryptocurrency rush, there has rarely been anyone discussing XRP,” Jack Tan, managing partner of Taiwan-based trading firm Kronos Research, told CoinDesk in a Telegram chat.
Lagging returns from XRP follow a lousy 2019, when the price fell 45% as bitcoin more than doubled. The token’s share of the total capitalization of the digital asset market has dropped to 3%, from 12% early last year, according to metrics compiled by TradingView.
Mike Novogratz, whose company Galaxy Digital owns a $ 29 million stake in software developer XRP Ripple, according to a Q1 2020 document, said in a January conference that he thought XRP would “underperform immensely again.” this year. He wasn’t wrong.
“We cannot control, nor do we focus on, the price of XRP on a day-to-day basis,” a Ripple spokesperson told CoinDesk in an email. “What Ripple is thinking about is the usefulness of XRP and creating solutions that solve real problems with global payments.”
XRP has been one of the most popular assets in the cryptocurrency industry since 2012. That year, as an alternative to bitcoin, the founders of what would become San Francisco-based Ripple gave the company 80 billion XRP out of a total of 100. billions created.
The leading software company working on XRP, Ripple is a startup with more than 530 employees, according to LinkedIn, and has raised over $ 286 million in venture capital from companies like Galaxy. The company’s main product offerings include RippleNet and On-Demand Liquidity (ODL), used to facilitate quick and cheap payments.
XRP is known for a community of often vocal and devoted supporters, who sometimes refer to themselves as the XRP Army and support both cryptocurrency and Ripple. There are also investment companies that support cryptocurrency.
“XRP is a perfect currency for what we do,” Michael Arrington, founder of TechCrunch who now manages Arrington XRP Capital, one of the largest XRP investment funds, said in a telephone interview.
XRP’s properties of being fast and cheap – Arrington said he was able to move millions of dollars into the digital asset for as little as $ 0.45 – is one of the main reasons the fund appreciates its future potential. .
“Right now we think XRP is dramatically underestimated,” he said. “All things being equal, we are buyers at these prices. Maybe it doesn’t leverage buyers, but we think it’s undervalued. “
Just last week, former Commodity Futures Trading Commission Chairman Chris Giancarlo said that XRP deserved to be considered a cryptocurrency, not a security. Giancarlo is now senior partner of the law firm Willkie Farr & Gallagher, of which Ripple is a client.
The question of whether XRP can be declared a security has dogged the business because a statement to that effect by the Securities and Exchange Commission would likely subject the token and its ecosystem to stricter regulation and potentially enforcement action. Multiple lawsuits, one filed recently in May, say XRP should be a guarantee.
XRP’s price hasn’t really moved in response to Giancarlo’s comments, perhaps an indication traders are still waiting to hear from the SEC on the matter.
Another rush is the sale of tokens in the market: Ripple Labs sells XRP to raise money, although according to a first quarter market report released by the company its token sales fell to $ 1.75 million during the first three months of the year. year, down 86% from fourth quarter levels.
One of the biggest users of XRP is the MoneyGram payments transmitter, which received a $ 50 million investment from Ripple Labs last year. Upon completion of the investment in November, MoneyGram announced that 10% of the company’s Mexican peso foreign currency liquidity was already using Ripple’s ODL product to transfer money.
In February, Ripple Labs executive Ashseeh Birla provided an update on MoneyGram’s progress using its technology:
In the first quarter of 2020, MoneyGram reported that it was able to reduce its operating expenses with a $ 12.1 million “benefit” derived from “Ripple’s market development fees”. However, there is no further information on ODL’s growth within the company’s business lines other than the fact that the partnership, valid until July 2023, is expected to continue to reduce expenses.
Ripple Labs has established relationships with hundreds of partners, including Bank of America, which has reportedly piloted some of its technologies.
But banks may be concerned about holding the tokens for fear of having to report any gains or losses to shareholders or supervisors, Haohan Xu, CEO of cryptocurrency liquidity provider Apifiny, wrote in an email.
“This is particularly due to the different regulations around the world and being exposed to volatility risk when holding XRP,” Xu said.
So can XRP’s demand be driven by the intended use or usage of its payment network? How will XRP’s regulatory issues end? Does the selling pressure resulting from the lack of proof-of-work mining create any concerns among traders?
“XRP is an interesting crypto asset because while the fundamentals seem to indicate growth and greater adoption, the price action is showing the opposite,” wrote Simon Peters, a cryptocurrency analyst at multi-asset brokerage eToro, in an interview. email to CoinDesk.
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BTC: Price: $ 9,432 (BPI) | Maximum in 24 hours: $ 9,441 | Minimum in 24 hours: $ 9,273
Trend: While bitcoin is flashing green at press time, it is still trading in the narrow range of $ 9,000– $ 10,000, largely stuck for over a month.
According to CoinDesk’s Bitcoin Price Index, the leading cryptocurrency by market value is changing hands close to $ 9,440, representing a 1.5% gain over the course of the day.
Prices are capped for the 11th consecutive day amidst mixed signals on the technical charts. On the bull side, the three-day moving averages (MA) at 50 and 100 candles produced a bullish crossover. A similar cross accelerated the uptrend in June 2019 and marked the start of a multi-year bull run in October 2015.
However, the three-day MACD histogram, an MA-based indicator used to identify strength and trend changes, has broken below zero for the first time since the beginning of April, confirming a bearish reversal. The daily chart is also reporting mixed signals with the MACD swinging below zero and the 50 and 200 day SMAs, signaling a bull market.
With indicators lacking consensus on the potential direction of the next range breakout, traders will wait for a strong directional signal to emerge.
A UTC close above $ 10,000 would restore the bull run from the March low of $ 3,867 and open the door to a $ 1,000 rally. On the upside, the February high of $ 10,500 could offer resistance.
Alternatively, a move below $ 9,000 will likely produce a sell off at the 200-day SMA at $ 8,267.
