Ripple's Market Capitalization Tops 11 Billion USD, Could This Become The Biggest Bubble Yet?
At the beginning of 2017, Ripple had a total market cap of only 250 million dollars, and now the value of the circulating supply exceeds 11 Billion..
If that fact alone doesn't immediately signal some red flags, then when we look deeper into the reasoning and influences behind the pricing run it will become clear just how overvalued Ripple currently is. Most of the serious investment over the past months into Ripple has originated from Asian investors. In the case of Ripple, most of the investment has come from Japanese investors. Japanese banks and high level investors have been experimenting with XRP, and the cryptocurrency has generated massive hype and expectations within the country. The level of price increases that Ripple has experienced over the past months is vastly disproportionate to any increases in practicality and usability that the coin has experianced.
Will XRP hold onto its gains?
On March 1st XRP was trading at 475 satoshi, but today it is currently trading above 17000 satoshi. When we consider the fact that XRP has experienced a 3500% increase in price over the course of less than 3 months, how could these types of gains possibly be sustainable? This level of change, even though it is positive, should be a major detail for traders and investors to consider when considering entering into a position. While this growth may be great for traders and stake-holders, if the price takes a sizable retreat like I assume it will, investors will quite literally loose billions of dollars. I don't believe that the current pricing level is sustainable in the slightest for XRP, but it may continue to run in the following weeks and months. The only long term outcome that I can see happening a major and sudden price retreat at some point back to a more sustainable level.
I have no idea how long XRP will maintain and continue to gain support, but I know that it will not last forever. I have no intentions to enter into any positions in XRP currently, because it is unclear when the support will drop off. If I was entering into a long term position on XRP it would be a short position, but in my opinion getting into a position too early is the same as being wrong and I don't feel comfortable enough that the price run will not continue.
These types of runs and the bubbles they create have a negative impact on the cryptocurrency market as a whole.
Much of the investment that is going into XRP out of Japan is coming from individuals and investors who don't want to 'miss' the next big crytocurrency. Many of the early investors have already seen huge profits to their positions, but there is no substance to the pricing level in my opinion. All altcoins are driven by speculation to a certain extent, but never has speculation added 10 billion dollars in value to a cryptocurrency supply in a matter of 2 months. If XRP does fail and experiance a major retreat, the negative press that would follow would likely look have a negative impact on cryptocurrencies as a whole.
Many of the people who dislike cryptocurrencies imply that the cryptocurrency market as a whole is just a giant bubble. If this turned out to be true for the second largest cryptocurrency in the market, then the support and likely investment in the cryptocurrency market as a whole would likely experience a decline. People don't want to miss the next big cryptocurrency, but pumping a coin to the extent that XRP has been, will likely have a negative impact on the long term success of the currency.
Even if we don't consider everything that is wrong with XRP, such as the centralization and technical aspects, the current price level is simply nothing other than unsustainable. Coins may be able to be driven to a certain point by speculation and hype, but when the coin makes very little progress towards that success, the dump and price fall that would follow would likely cause many people to loose a very sizable amount of money and investment. One of the worst things that could happen to the cryptocurrency market is if a top currency looses 80% of its value very quickly, regardless of how it fast it gained it. When XRP looses its support and the market turns, I wouldn't be surprised in the slightest if it fell 80% in price and market capitalization in a matter of weeks. This would likely cause institutional and high value investors to be much more skeptical and weary of the cryptocurrency market and investing in it.
I really hope that you enjoyed this post and I urge you to leave any comments, discussions, or input below. Thanks for reading!
Thank for sharing! I am interested to find out your thoughts on whether we are in a cryptocurrencies bubble now? Here is the DATA which support this my assumption: it looks that we are entering bubble territory for a vast majority of alt coins (except Bitcoin probably). Just think about and analyze the following facts:
At least several dozens alt coins market caps skyrocketed 300%-4000%(yes, four thousand!) recently just over last 2 months!
The beginning of sharp increase happened around middle of March of 2017 for ALL alt coins!
Yes, some alt coins sharp increase is logically justifiable. For example, Ripple XRP: http://www.cnbc.com/2017/03/01/japanese-banks-plan-to-adopt-blockchain-for-payments.html . Maybe there are couple other alt coins where this huge growth is also justifiable.
But for vast majority of other alt coins nothing has changed drastically during the last 2 months! At all! Neither in their technologies development, nor in their business development! But nevertheless, their market cap skyrocketed 300%-4000% in just 2 months!
The only explanation which comes to mind is that huge amount of new capital is coming to cryptocurrencies market. Probably these are the people/investors who have heard about the first wave of Bitcoin and Ethereum successes, and they have a FOMO (fear of missing out) now. They don't have deep understanding of cryptocurrencies space and their differences, but because of FOMO they still invest in all other alt coins hoping to hit jackpot!
Does it remind you anything? Yes, exactly, dot com bubble of 2000 looks very similar!
Therefore, I would expect some kind of significant downside price correction within next several months for the majority of alt coins. Would you agree?
Awesome reply! The recent support and capital that the cryptocurrency market has gained over the past several months is a sign that there is additional interest in cryptocurrency, especially by high value and institutional investers. While some of the coins that have experienced serious gains have gained practicality and passed technical hurtles, very few of the coins have made signficant enough advancements to justify their price increases.
I personally don't consider the cryptocurrency market as a whole a bubble yet, but there are defiantly some major bubbles forming that we will see the consequences of in the upcoming months.
The fact that with most coins the technology has made little improvement while the price has seen major gains leads me to assume that many investors currently just don't want to miss out on the 'next big thing'. I think that there are many cryptocurrencies that are currently drastically over valued,and I think many coins will experience huge loss of value in the upcoming months and years.
Blockchain technology is so valuable, and firms and high level investors are beginning to realize that. The problem is that there currently enough projects that are truly worth what their market cap is. If the amount of money that individuals want to invest drastically outweighs what the projects are currently worth, then we will see many coins hold highly inflated and unsustainable price levels.
I'm sorry if this seems kind of confusing due to my wording!
This is a very helpful post. Good judgement can only come from experience and information. FOMO fear of missing out, is a terrible thing. Don't go chasing things higher in desperation but go ahead and buy a little of whatever coin, just so you're in. Always be prepared to stomach the loss. Remember many people are in for 2 and 3 cents on Ripple. They can go on selling all the way up. Be happy for them.
Also keep researching and put your money in good long term projects/investments. It's alright to sell something to a bigger fool who comes in later but remember it doesn't really help the economy -- it's just skimming the excess off of a mania.
++++ if i could i would vote twice. thanks your sharing your thoughts
The most important rule for people to follow in my opinion is never invest any money that you cannot afford to loose. I know it is the #1 rule in investing in cryptocurrencies but it seems as though it is often overlooked.
Most of the people who have the FOMO or are looking for 'the next bitcoin' are new traders who don't fully understand what the cryptocurrency market is. Of course there is profit potential, but theres also the potential to loose every single penny they invest. Investors in the crypto market who want to 'get rich quick' by investing in the next big thing often loose most a good potion of their investment. Traders who are consistently profitable and have been for some time typically take safer and well rounded positions compared to new traders looking to use crypto investing as their way to 'get rich'.
Good advice, I hope they follow you, I do.
This is spot on! I had a ton of ripple and sold them all with very good gains but before this huge run up. Although I had nice profits I still feel like I loss. Weird how FOMO works. The greed and fear is real. It hurts but I will not re-enter the xrp market for a while. This article helps me stay focused on my trading strategy. Thank you!
XRP's breakout seems to coincide with the news that some Japanese banks have begun to adopt the technology to handle payment of small transactions in their backoffice clearing. Having a coin that is immersed in real commerce lends it some credibility. Where the price goes from here is another story.
The news may increase the practicality and use cases of XRP, but the increases in practicality and probability of future success are not anywhere close enough to demand the pricing level and market capitalization that it currently holds.
There is very little that could make a cryptocurrency 3000% more valuable than it was just 3 months prior in my opinion, but especially when we consider that the project and coin haven't made any future altering changes or breakthroughs.
I agree with your opinion on XRP. 3000% moves are rare and generally unsustainable. Yet, I still kick myself for letting my wife talk me out of buying BTC at .04$ and again at $1 and again at $10....
the whole bitcoin world is fascinating to me , my concerns are in the timing, it greatly resembles a ponzi scheme so if you can get the timing right you can make a killing, the trick is to not be a kevin bacon.
It resembles a Ponzi scheme until you get a full understanding of why and how Bitcoin works. There are some coins that are definitely comparable to Ponzi schemes, but Bitcoin as a whole is something different. Just keep trying to learn and gain as much knowledge as you can and you'll get the hang of it all pretty quick
i love the idea of it , the reality that currency is really nothing more than a set of code on a machine is hard to wrap your head around, and trying to find the next bitcoin is worth throwing a couple of dollars at, i am still trying to figure out the conversion quandry, and how that will be taxed if it is taxed at all.
Why it's hard to wrap your head around it? Do you have a bank account? Do you use a card to pay online or in shop? That's your currency stored as a set of code on a machine just in a manner we humans can read it easily. You could quite easily store your $14.45 as 1110.01110011001100110011 :)
The underlying technology behind it thought it's another story.
I've been having a similar sentiment with regard to XRP. I can't bring myself to buy into it at these inflated prices. I'd rather go looking for the cheap coin that might be the next XRP.
Which may turn out to be XRP. It's easy to think you're smarter than the market.
I wouldn't say smarter than the market. It is the understanding that there is always another opportunity over the next horizon. Chasing the opportunity that was missed could prove less effective than looking for the new opportunity not yet realized.
Good post. Good to see I'm not the only one who thinks like this. No matter how populair a coin is. People should always do a proper background check. It surprises me how many coins are out there that don't have their basics right. Does anyone know about: https://www.coincheckup.com Since I use this site I make so much less basic investment mistakes. Check for example: https://www.coincheckup.com/coins/Ripple#analysis To see the: Ripple Detailed analysis.