Bitcoin (BTC) is off today, trading at $3,579
more than 4% down since yesterday’s $3,741 close. Other major
crypto coins have followed suit – Ethereum (ETH) is down 5.5% and Litecoin
(LTC) is down 6.5% – and
the crypto markets generally have lost over $5 billion from their
total market cap in the last few hours. You can watch the rout in
real-time at CoinWatch.com, if you are not faint of
heart.
The sudden drop, after 9 days holding over $3,600, has investors
and traders asking if this is the next step down for Bitcoin. In
the eyes of many analysts, key point will be if BTC falls below
$3,500 – that is seen as the main psychological barrier, and a
sustained dip below that level will indicate further collapse to
come. It’s a grim portent for a crypto market that’s been in bear
territory for going on a year now.
One major player, however, has far less to worry about as the
bottom falls out of the cryptocurrency trading market. In fact, in
a bit of irony, a cryptocoin collapse may actually help.
Ripple Outperforms the Market
Ripple (XRP), while down 3% today, may actually
benefit in the long run if cryptocoins fall. That’s because Ripple
did not start as a cryptocurrency, and XRP, company’s altcoin
trading unit, is not actually it’s most widely used product.
Ripple is a shortened name for the RippleNet, a blockchain
based, cross border payment system, originally designed to
facilitate international bank-to-bank payment transfers. The XRP
altcoin was developed to store value on Ripple’s network, making it
easier to track and log transactions. To this day, the Ripple
company controls 60% or more of the XRP in existence, using it in
the payment transfer aspects of the business.
The Hidden Strength of XRP
And now we get to Ripple’s most widely used product: xCurrent, a
software product that connects Ripple with existing bank transfer
infrastructure, making RippleNet’s speed accessible to the bank as
a viable alternative to the SWIFT network. The advantage of Ripple
here should be obvious, as the blockchain system can do in a few
minutes what would take SWIFT several days.
Ripple’s control of the XRP token gives it an added strength as
a challenger to SWIFT: XRP can be used to both facilitate currency
transfers, and avoid the costs involved in currency
exchanges. The sender can use US dollars to purchase XRP, which can
be transferred rapidly to the receiver, who can convert the XRP to
any desired currency – at that day’s rate, without the commissions
usually involved. The only fees are Ripple’s, for the transfer
service, and Ripple’s transaction costs are based on multiples of
their minimum fee: 0.00001 XRP. About 0.00031 cents US, at today’s
rate. That’s 31/100,000 of an American cent.
And Now a Word from the Experts
Ripple’s CEO, Brad Garlinghouse, makes a sales point of his
company’s faster, cheaper cross-border transactions. “The average
Swift transaction takes three days — but really what we're seeing
is three business days. You're taking fiat volatility risk while
markets are closed over the weekend,” he says, and describes
cryptocurrency as a “bridge” between various national currencies.
He says that large banks, like Citigroup, will his company’s last
clients, as they have the largest vested interest in the current
system.
While Ripple’s current customer list covers some 200 small to
mis-size banks, they are widely distributed. The company’s global
head of strategy, Marcus Treacher, focuses on a Ripple’s growth as
a transfer system. “There is a lot of activity in the Middle East
and in India, as you mentioned during the introduction, in
Southeast Asia, and also in Latin America. We see a lot of growth
as well in Northern Europe. So there is really a nice global
coverage that is building very quickly.”
Summing Up
So, will blockchain based cryptocurrencies collapse completely?
I don’t know. Bitcoin is still above $3,500 today, and Ethereum is
at $116. Ripple’s XRP, used an altcoin, has declined less than the
crypto market generally. But there’s no doubt that crypto
currencies are truly in a bear market, and that traders are getting
nervous. A token with an added benefit is likely to show surprising
strength when – or if – the bottom does fall out.
Author: Michael Marcus