Hello Everyone,
Let's talk about one of the craziest stories in crypto right now, Ripple.
Ripple has been on a tear. It's one of the best performing crypto assets this year, beating Gary Gentler's multi-year lawsuit, launching a new stable coin, influencing US politics with multi-million dollar donations, and even rolling out new investment products.
Congratulations XRP holders.
If you've never heard of ripple or how it works I want to explain it. Ripple is the technology company created to solve a very big problem with money, that's because today traditional banking systems rely on a web of banks with high fees and long processing times for international payments. So in 2012 along comes a company called ripple to solve this problem by using something called the ripple net network which allows banks and financial institutions to settle payments almost instantly with very little fees using the native cryptocurrency $XRP.
Now it can get super confusing with all the words so here's a cheat sheet for you it would be really important for later as dive deeper.
There is ripple, ripple net, and xrp which are interconnected but separate entity and each one serves a unique purpose within this ripple eco system. So ripple is the company behind everything, ripple net is the network facilitating the transactions, and xrp is the cryptocurrency that powers liquidity and settlements within this ecosystem and so far there have been several billion transactions on this network. Some people are speculating that the price of xrp could go up substantially even from this point onward, now I have no idea what's going to happen but I do want to share some theories behind why it could become more valuable in the future.
There's a lot of exciting news and developments so let me explain exactly what the heck is going on and how I'm investing so let's get into it.
Now earlier this year, ripple win the lawsuit against the SEC, when the judge ruled that xrp sales to ordinary retail investors didn't constitute security transactions. Now this ruling gave ripple and xrp a very much needed clarity that has since allowed the company to move forward with their ambitious plans, and one of those plans is the launch of something called Ripple USD (RLUSD) on December 4th 2024. RLUSD is a stable coin tied to the US dollar and fully backed by reserves 1:1.
Now, unlike most stable coins which have also had a lot of really angry regulators for the lack of transparency, RLUSD is expected to be one of the most regulated stable coins in the market and that's because ripple is working with the New York Department of Financial Services or NYDFS, which is one of the toughest departments on crypto and that's to make sure that they are compliant, giving RLUSD a level of credibility that could have attract some big time investors. One of the questions you might have is why would ripple even need a stable coin when XRP already exists? Well, the answer is stability. While XRP is really good at fast, low cost, contribute country payments, a stable coin like RLUSD could give stability and value making it more ideal for day-to-day transactions and settlements. This move actually puts ripple in direct competition with stable coins like Tether and USDC, except ripple has a huge advantage over all of them, regulatory oversight that's because right now governments worldwide or cracking down on an unregulated stable points because banks and countries don't want competition from the free market they want some kind of a control and RLUSD is compliance with NYDFS standards. This could make it a more attractive option for these banks and businesses looking to adopt stable coins without the regulatory headaches from the governments. So if you are a bank you've got two options, one is to use a regulated stable coin and the other option to use one that isn't. Most banks will go with option number one, so this launch is not just a product release, it's a strategic move to position ripple in the center as one of the leaders in the traditional/crypto finance space and one of the other big ways that ripple is doing this is getting involved in politics. In fact ripple actually has a lot of political influence which is a huge help when it comes to the adoption of its products, for example the company recently made headlines for donating 25 million dollars to fairshake which is a pro crypto political action committee or PAC and over the past two years ripple has contributed total of 75 million dollars to this pack and that makes it one of the biggest donors in the crypto industry. Fairshake's mission by the way is to elect candidates who support crypto friendly laws and innovation and ripple CEO Brad Garlinghouse says that it's super important that the crypto industry has regulatory clarity and if they can pull that off they can determine how easily cryptocurrencies like XRP and stable coins like RLUSD can integrate into the mainstream financial system. And ripple strategy doesn't stop at lobbying and stable coins, one of the biggest developments is that they are trying to integrate into the traditional investment world through what are called ETFS. Remember ETFs are those stocks or mutual funds that people put their retirement savings into and just recently WisdomTree which manages over 100 billion dollars in assets filed what's called an S1 form with the SEC to apply for their own spot XRP ETF.
Thats a lot of acronyms and words i just threw at you but just remember this is the thing that happened with bitcoin earlier this year when it was securitized and you could buy bitcoin on your favorite brokerage apps through ETFS like Ibit for example, and when that happened here's what happened to bitcoins price.
Bitcoins price went way up and that because rather than having to learn how to store your own crypto and to protect it you could just buy the ETF and let a real professional asset manager figure it out for you and that's what people are choosing to do. It's also one of the reasons why bitcoins prices close to $100,000 a coin and WisdomTree by the way is not the only company that's trying to get their own spot ETF but also companies like Bitwise, 21 Shares, and Canary capital who are also trying to do this same and if BlackRock is involved I imagine its pretty much guaranteed that an XRP ETF will be approved at some point in the future. So that is just some of the reasons why people think XRP could be worth more in the future.