If I were forced to buy a single cryptocurrency, it would not be Ripple (CCC:XRP-USD).
That said, XRP is at a price that is extremely low both compared to the other big cryptocurrencies and compared to its recent trends. If you’re looking to make a speculative bet in the crypto space, buying XRP under a dollar would be a smart place to start.
Here’s why I recommend Ripple to those looking to speculate on crypto.
The Great Crypto Reboot
China played a starring role in the latest crypto correction as the country clamped down on Bitcoin (CCC-BTC-USD) miners. To a certain extent, Elon Musk played a supporting role as Tesla (NASDAQ:TSLA) stopped accepting Bitcoin payments for its vehicles on May 12. He felt the environmental impact of Bitcoin went against everything Tesla stood for.
As a result, all the major currencies tumbled in value. On May 18, XRP was trading around $1.70. By May 22, it had fallen below 70 cents. Over the same five days, Bitcoin fell from around $43,000 to nearly $31,000, a 27% decline. If you pull back to May 8, BTC lost 47% of its value.
How much did Ripple lose over those same 15 days? Approximately 59% of its value, falling from $1.60 to 65 cents.
Crypto buyers shouldn’t be surprised by the latest correction. Over the past year, Ripple’s had four major corrections, three of them delivering more than 50% losses.
At the end of April, when XRP was trading around $1.36, I argued that it was due for a correction. This despite InvestorPlace’s William White providing readers with several expert predictions of $2 or more by the end of the year.
I didn’t have any particular inside scoop on Ripple. I merely felt it had gone too far, too fast. Given the China/Tesla combination, I got lucky in my assessment. It’s possible that XRP could have hit $3.30 by the end of May — PrimeXBT Market analyst Kim Chua’s price prediction — if not for those events intervening on its progress.
Now trading around 87 cents, XRP as a speculative bet has gotten more attractive. Except for the latest correction, the cryptocurrency has nearly entirely traded over $1 since the beginning of April, except for an approximately 2-hour plunge on April 25. That’s the better part of two months.
While I’m not a technical analyst, it would seem that 80 cents is the support line for XRP at the moment. Unless Ripple Labs gets bad news on its SEC fight, I would think that the odds of its moving above $1 over the next 2-4 weeks are much higher than it moving below 80 cents.
Sure, you might be able to buy on a temporary dip below 90 cents, but if the experts are right and XRP trades above $2 by the end of 2021, you will have missed out on the double because of a few pennies.
In other words, the risk-to-reward proposition today is favorable for the speculative investor.
What Will Become of Ripple
My colleague has done an excellent job covering cryptocurrencies in 2021. On May 21, White provided readers with five interesting pieces of information regarding Ripple, the Securities and Exchange Commission (SEC), and the cryptocurrencies’ future utility for banks and other financial institutions.
I firmly believe that the winning cryptocurrencies in five years will be those that provide utility first and store-of-value second, not the other way around. And while I really like Cardano (CCC:ADA-USD), it’s hard to ignore the fact Ripple has partnered with the National Bank of Egypt, the country’s largest bank, to facilitate cross-border payments from the United Arab Emirates (UAE) to Egypt.
“NBE’s partnership with Ripple will help to improve overall efficiency by enabling NBE to establish new alliances across wider markets with reduced cost and quicker integration time,” Hesham Elsafty, Group Head for Financial Institutions and International Financial Services at NBE, stated in a May 18 press release.
“We are very excited to announce our new partnership with Ripple and Lulu which we believe will contribute to a further acceleration of the Egypt-UAE remittances corridor.”
When you read something like this, it’s easy to be cynical about the benefits of such a partnership. After all, if you’ve invested long enough, you know that sometimes the statements made announcing partnerships aren’t worth the paper they’re written on.
It definitely makes sense to follow this story to its ultimate conclusion. Should RippleNet continue to build these kinds of partnerships, it’s hard to bet against Ripple.
The Bottom Line on Ripple
I continue to debate with myself the need to buy cryptocurrency. I know plenty of smart people who have and profited nicely. We all have our own wins and losses.
At the beginning of the year, I probably would have said with 100% certainty that I wouldn’t own XRP or ADA in 2021. Those odds have dropped dramatically merely by getting a better understanding of how these things work.
That said, I’m not there yet. I’d say the probability at this point is about 50%. We’ll see how I feel three months from now.
In the meantime, if you’re a speculative investor, buying Ripple under $1 would seem to make sense. But only if you can afford to lose 100% of your investment.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.