The speculative frenzy that the crypto space is experiencing at the moment has made fundamental analysis less important than it should actually be. This is evidenced by the way speculators are trading on greed and emotion instead of fundamentals. A typical example, in this case, is XRP, Ripple’s RippleNet ledger native token that has blown up by about 1,400 percent in the last month and it is still surging forward.
The frenzy is, of course, short term but there is an opportunity for long-term analysis amidst all this. In December 2017, despite the long-term stumbling blocks in XRP’s journey, the technical analysis and price action charts indicated that it was just getting ready for a price spike – it was trading at about $0.25 – $0.30 at the time.
The short-term analysis
Ripple may not be overbought but this does not imply that the market will stop buying. In fact, if XRP keeps at its exponential growth pace this year, then its long-term fundamentals are likely to change for the positive. This is according to the Theory of Reflexivity a la George Soros. In XRP’s case, the aforementioned fundamentals are entwined with the long-term probability of financial institutions using it as a quasi-reserve currency. To achieve this, there needs to be demonstrable growth in; liquidity and market makers; institutional derivatives that would allow financial institutions to hedge foreign exchange exposure on their balance sheets; and getting these financial institutions on-board XRP’s current xCurrent and xRapid offering in both the exotic and non-exotic corridors.
Reflexivity for XRP
The demand and mainstream adoption of XRP may be increased substantially by reflexive price appreciation. A speculative spike in demand for XRP will cause a pronounced increase in liquidity and potential derivatives coverage – this would give Ripple the opportunity to onboard more banks onto xCurrent and xRapid thereby paving the way for XRP’s quasi-reserve currency (QRC) status.
It is likely that XRP’s primary driver at this point is speculation. Fortunately, this speculation may actually steer XRP towards success in the long-term by increasing market liquidity, mainstream adoption as a medium of exchange as well as derivatives coverage. This will eventually spark off debates regarding the future of XRP as a QRC which is, in many ways, in line with Ripple’s most prioritized business goal; growing financial institutions using xRapid and xCurrent to make global payments.