XRP Price Mania on “Airdrop” could increase XRP by 300%. Time to buy?

Since November, the evaluation on XRP (CCC:XRP) nearly tripled on the craze for the upcoming “XRP Airdrop”, a promise from the blockchain network Flare Networks to give away up to 45 billion free XRP tokens. According to the company, anyone who owns XRP on December 12 (excluding those who work at Ripple Labs) will receive Spark Tokens, which can be exchanged 1: 1 for XRP.

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It almost sounds too good to be true – the company is giving away free money to just about everyone who owns XRP.

But there is some reason for the madness. Payment processor Square (NYSE:SQ) did a similar trick when they launched the Cash App for mobile payments. To get the initial users, Square was giving away money every week. And it worked. People joined by the hundreds, looking to win $ 200 or more in weekly prizes. And the more people joined, the stronger the network became. Cash App now boasts 30 million users and may even be worth more than its parent company.

Flare’s Airdrop may work similarly on XRP. With more people buying into the altcoin, its popularity could increase, pushing XRP prices, currently hovering above 62 cents to $ 3 and beyond. So what’s the catch?

Ripple Price: What Does Flare Gain From Airdrop?

Experienced investors would naturally wonder why Flare Networks would voluntarily give away 45 billion XRP tokens. If it sounds too good to be true, there is probably a problem.

And here it is: Flare Networks is giving away Spark tokens, not XRP. The company is trying to attract users to its Flare Consensus Protocol, and the token distribution is an incentive for people to participate.

Furthermore, the company is not particularly clear Such as you can exchange your Spark tokens with XRP. Even if they are willing to trade them at a 1: 1 exchange rate, there’s no reason they can’t delay trading for months or years. Or they might limit the number of people who can trade Spark with XRP.

Tether offers a sobering lesson to cryptocurrency investors. In 2015, the company backing the “stablecoin” offered a 1: 1 exchange rate to the US dollar. In other words, anyone who owns Tether could “resell” Tether to its parent company.

But the deal began to crumble in 2017, when investors started wondering if Tether had enough money in the bank. Today, Tether is back from its low of 92 cents to the dollar, but doubts remain about the solvency of its parent company.

XRP owners may experience the same problem with Flare Networks. While users may own a lot of Spark tokens, trading them for XRP (and therefore for dollars) may prove to be more difficult than expected. Meanwhile, Flare could proudly claim that they have a huge Spark user base as they search for a SPAC to make them public.

What drives the XRP price?

So, will Flare’s XRP Airdrop increase the price of the cryptocurrency? Probably.

To understand why, I’m going to tell you a secret about investing in cryptocurrency: prices aren’t driven by investors looking for safety. The correlation between XRP and US bond yields (a proxy for “safe” assets) is only 3%. Even gold, the latest “safe haven”, has only a 20% correlation with XRP prices.

Instead, XRP prices are driven by other cryptocurrencies, in particular Bitcoin (CCC: BTC).

Between 2016 and today, the correlation between XRP and BTC has averaged almost 40%. It’s not as high as other altcoins that use Bitcoin’s architecture (Litecoin has a 60% correlation with Bitcoin), but it still means that investors can calculate half of XRP’s return on BTC’s rotations.

And this is where things get interesting.

To break the bond with Bitcoin, XRP needs to grow a life of its own. And this is where Flare Networks comes in. By adding the protocols (aka the service for using XRP), the company hopes to differentiate XRP from Bitcoin and other altcoins. You succeed and XRP is about to make a big profit.

Why invest in Ripple’s Crypto?

XRP already uses a different architecture than Bitcoin. Ripple Labs, the creator of the cryptocurrency, initially created the currency to send money between banks; today the company still controls the “mining” validation process.

While some users may hesitate to centralize XRP, the process has some advantages:

• Centralization prevents the massive race to the bottom that occurs when miners compete against each other.
• Validation it happens much faster as there is no distributed blockchain to be updated continuously.
• New protocols like Flare can be added quickly.

This makes XRP and Ripple much more similar Visa (NYSE:V.) or MasterCard (NYSE:BUT), companies that are worth billions of dollars, compared to Bitcoin.

How to invest in the XRP airdrop

Those looking to take advantage of Flare’s XRP Airdrop need to act quickly. The December 12 cut-off date is fast approaching and you must own XRP before that time.

So how can you get started?

1. Register on a cryptocurrency exchange
2. Buy XRP
3. Make sure you request your Spark tokens before they expire
4. Convert tokens to XRP and finally
5. Convert all your XRP holdings to US dollars

Of course, the risk is that the XRP price will collapse in the meantime due to the swings in Bitcoin prices. And several catalysts could make it happen. But if you’re willing to take these risks and hold on, XRP could quickly pay back 300% over the next few years as adoption continues.

Time to place those bets. It will be a wild ride.

As of the date of publication, Tom Yeung had (neither directly nor indirectly) any position in the titles mentioned in this article.