Is The Rise In Ripple's Prices A Bubble?
In the cryptocurrency world, news about skyrocketing prices and valuations mostly elicits shrugs. But Ripple’s rise has raised hackles and disbelief.
The cryptocurrency’s price spiked recently after news of banking consortiums in Japan and South Korea testing its technology for cross-border transactions. On the face of it, those developments might indicate positive news.
But the jury is still out on the details of those tests as well as actual benefits accrued to banks. To that end, commentators and observers are questioning and the logic behind Ripple’s increase.
The case against Ripple (XRP) rests on two charges.
The first one pertains to the cryptocurrency’s dubious role in the payment network. Ripple was originally designed as a payment network protocol to bring down transaction costs associated with cross-border transactions. The cryptocurrency was added only later to prevent “network spam.”
Its use in banking systems could be a potential game changer for its prospects. In addition to being a bridge between multiple world currencies, Ripple could also play a market maker role, similar to the one played by governments and institutional players in forex markets, by providing liquidity.
But that future isn’t happening anytime soon.
According to Nathaniel Popper, reporter with the New York Times, XRP isn’t used for “anything” and banks haven’t signaled a potential use for it yet. A CoinDesk article states that a majority of Ripple’s banking clients only use xCurrent, a tool that the article describes as a “glorified messaging system.”
(Incidentally, the Financial Times has an interesting blog entry about the development of a similar currency, the eurodollar, which was outside regulatory purview during the 1970s
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