Of all the major “alt-coins,” the alternatives to Bitcoin that have sprung up this decade, none has been more focused on becoming “real money” than Ripple (CCC:XRP-USD).
Ripple was born with big backers, like Alphabet’s (NASDAQ:GOOGL) Google Labs. It has worked extensively with banks around the world, and its business plan remains to integrate its technology into existing payment systems.
So, if any alt-coin is going to stabilize, you figure it will be Ripple. If any alt-coin is going to become a medium of exchange, rather than a speculative asset, it will be Ripple.
But that’s not how it’s working out.
Why Ripple Has Fallen
As Bitcoin’s value has fallen through 2018, from a high of $20,000 to its August 8 price of about $6,500, Ripple has come down right along with it. A Ripple coin was worth $3.30 in January. It’s now worth 36 cents, and its value relative to Bitcoin has been falling as well.
The reason, as I explained back in February, is that cryptocurrency is a market dominated by Asian speculators. Americans may act as cheerleaders and technology innovators, but the people buying and selling cryptocurrency are, for the most part, Asian investors.
A recent analysis by the cryptocurrency angel fund Block0 shows that this is increasingly true. Asian currency markets represented 59% of trading in the fourth quarter of 2017, and 77% in the second quarter of 2018. The greatest interest by country comes from South Korea.
An asset that is dependent on speculation, whose value is subject to change without notice, is not a good medium of exchange. Why should Thai workers in Japan send their money home as Ripple, rather than Bhat, when the value of that Ripple might fall 10% in one day, as it did August 7?
The latest fall comes alongside an unexplained rise in Tether (CCC:USDT-USD). Tether’s value is supposedly tied to the U.S. dollar but its sponsor, Bitfinex, is in Hong Kong and has never been audited. Tether is often used to arbitrate trades, because of the supposed dollar tie, and Bitfinex has been accused of using it to pump up cryptocurrency prices.
In their continuing efforts to seek legitimacy, crypto managers are constantly seeking the validation of trusted sources. Case in point, Bill Clinton is scheduled to keynote the next Ripple conference.
Most recently, Tether Ltd. had former FBI Director Louis Freeh verify that Tether does indeed have the dollars to back its coins it claimed to hold in June, with about $7 million to spare. That didn’t prevent the latest hiccup.
The Bottom Line on Ripple
Cryptocurrency remains thinly traded, mostly in east Asia, and the value of all so-called “alt-coins,” like Ripple, remain correlated with that of Bitcoin itself.
As this was written, Bitcoin still represented 48.6% of the total market. It is the strongest of all the crypto-coins, by far. The total value of Ripple, $14.4 billion, is a little more than 10% of Bitcoin’s valuation, $114.3 billion.
Until Bitcoin stabilizes, none of the other alt-coins, including Ripple, will be able to find stability, and it is stability that is necessary for Ripple to become a medium of exchange rather than a mere speculative asset.
If Intercontinental Exchange (NYSE:ICE), owners of the New York Stock Exchange, can’t create stability in the Bitcoin market — and the price of Bitcoin has fallen over 10% since they announced their interest in that — it’s hard to see any alt-coin, including Ripple, finding the stability it seeks.
Dana Blankenhorn is a financial and technology journalist. He is the author of a mystery novella involving Bitcoin, The Reluctant Detective Saves the World, available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this story, and no cryptocurrency. To follow the value of cryptocurrencies bookmark https://coinmarketcap.com/