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What is Ripple?
The Ripple Cryptocurrency is an open payment system in beta. Its goal, in 2019 is to allow people to break free from financial institutions like banks, credit card companies, and other networks thow will the consumer price index influence the economy that enforce fees and foster delays. As per market size and capital, Ripple is the third-largest cryptocurrency, sitting just behind Bitcoin trading and Ethereum trading.
The Ripple network now has billions of dollars worth of cryptocurrency on account. It was built as a digital payments network for real-time financial transactions, and is also the core owner of Ripple XRP, the digital coin that increased its value 40 times in 2017 alone.
To avoid confusion, the network is referred to as Ripple, and the Ripple coin as XPR – Ripples. The frequency of releasing new coins into the system influences the ripple price and rate. In total, there are 100 billion XRPs in existence, and Ripple owns approximately 60 percent of them. If you take all this valuation into account, it would be worth more than several US tech startups put together. XRP is majority owned and tied to a single company.
Ripple is constantly investing in its network and growing partnerships with global firms and financial institutions. Some of the banks that have signed on to use Ripple include BBVA, SEB, Start One Credit Union, and Cambridge Global Payments.
As the market and network continues to grow, so does the potential of Ripple’s value.
Ripple Adds Smart Contract and Decentralized Finance Capability
In late 2020 XRP was added to the Flare Network, bringing with it Ethereum-like smart contract capabilities and the ability to function in the decentralized finance niche. That was notable for several reasons.
The first reason is that this connection actually caused the XRP cryptocurrency to triple in value over several week’s time, and then crash just as hard in the following several weeks. Why did this occur? Because one of the events that marked the addition of the smart contract functionality for XRP was an airdrop of Spark (FLR) tokens from the Flare network.
What is an airdrop and why did it have such a severe impact on the price of XRP? And what do south african investors need to know about events like this?
One consideration for investors in this case is that XRP is the third or fourth largest cryptocurrency by market cap. If it hadn’t been so huge, with such a massive following, this airdrop likely wouldn’t have had nearly the impact that it did. The connection with Flare and Spark is going to be quite important for Ripple in the coming years, and investors were simply taking advantage of an opportunity, and later cashing in and taking their profits.
So basically, what happened is that the Flare network added XRP to its ecosystem, giving the token the ability to utilize smart contracts like those used by the Ethereum network in the creation of decentralized applications. Most importantly in this case is that it will give Ripple the ability to create decentralized finance (DeFi) applications, helping it to make further inroads in the traditional banking, loan, and finance ecosystem.
As part of this addition the Flare Network chose to distribute its Spark token via an airdrop, or giveaway to any person holding XRP on December 12, 2020. The distribution was basically a 1:1 giveaway. So, anyone holding 100 XRP will also receive 100 FLR when the Flare network main net is launched. In essence this is free money for XRP holders and many investors rushed to load up on XRP ahead of the airdrop date, thus driving prices significantly higher.
Once the airdrop was complete, and there was no longer a reason to hold XRP tokens they were sold off by those same investors who were really only interested in getting free money in the form of FLR tokens.
Still unsure why this is relevant? I mean with the airdrop done you would presume there’s no more impact on XRP in the near future.
This is relevant because adding DeFi functionality to Ripple is a huge step. DeFi functionality will allow the Ripple network to get into many other financial transactions aside from banking. Already it is being used for insurance, loans, betting, and creating steady interest payments for holders. It has become the biggest draw for cryptocurrencies in the past year, and until now all of this decentralized finance has run exclusively on the Ethereum platform.
Once the true power of this addition to the capabilities of XRP becomes understood it could be game changing for XRP. Because all of the applications built to use the new smart contract functionality will need XRP to run. That will dramatically increase the demand for XRP and as a result the price should rise as well.
How to Trade Ripple CFDs in 4 Easy Steps:
- Open a trading account with AvaTrade ZA
- Fund your account
- Enter your preferred investment amount
- BUY (Go Long) or SELL (Go Short) Ripple
Why Trade Crypto CFDs With AvaTrade ZA?
- Uncompromised Safety – With six regulatory authorities and segregated accounts, your money is protected at all times.
- Many Cryptos to Choose From – Trade on the wide variety of cryptos available on our trading platforms.
- No Hidden Fees – We offer zero commissions and no bank fees on transactions!
- Crypto Never Goes to Sleep – AvaTrade South African is one of the few brokers offer around-the-clock service and support in 14 languages.
- Generous Leverage – Increase your initial capital with generous leverage and get far more exposure to trade than your account balance. Up to 2:1 (for EU residents) 25:1 (for non-EU residents).
- Limit Your Risk – You can preset profit and loss levels by using stop losses or take profit limits when you trade. Determine the maximum amount you are prepared to risk when speculating on the ripple price, or set a price at which you want to take profits. Future orders like Buy Stops and Buy Limits are also available.
- Trade Cryptos Against Fiat Currencies – Unlike many exchanges out there, who are restricting their clients to trade only Crypto to Crypto, our clients can trade Cryptos against Fiat currencies (USD, EUR, JPY etc.), as well.
What are the advantages of Trading Ripple with AvaTrade ZA?
- We offer Ripple CFD trades with up to leverage
- You can start trading Ripple from as little as
- This volatile crypto makes for an excellent addition to any financial FX trading portfolio
- AvaTrade ZA is one of the only brokers that offers around-the-clock Ripple trading, for maximum convenience
- You can sell Ripple (Go Short) and potentially profit even when the market price is in a downtrend
- Enjoy live language-specific customer support around the clock
- AvaTrade ZA offers zero commissions on Ripple trading and no bank fees charged on transactions
- Zero exposure to hacking or theft simply because you don’t actually own a digital wallet
- AvaTrade ZA is regulated on 5 continents
- Execute trades in just 3 clicks, free from the complex crypto purchasing process
Based on the Ripple website, their concept is a “basic infrastructure technology”.
The idea of Ripple was developed in 2004 by Ryan Fugger from Vancouver, Canada. The currency was developed during the following ten years until finally, in 2014, various large banks started using Ripple and the related payment networks. The Ripple system offers numerous advantages to banks, like distributed ledgers, price and security.
The company behind Ripple is “OpenCoin”. There are two separate entities that make up Ripple:
- The payment network – Ripple
- The actual currency on the payment network – XRP Ripple
Building on the decentralised digital system, Ripple’s concept is to work with different payment systems worldwide.
Ripple allows businesses to perform transactions within 3-5 seconds. The payments are processed and received automatically and are irreversible. Various financial institutions worldwide have established partnerships and started using the Ripple system.
In many ways, Bitcoin and Ripple are similar. Like Bitcoin, the Ripple coin has a limited number of units that can be mined. Both can be transferred from peer to peer, and both have digital security keys to prevent face transactions of coins. Payment information on the ledger is private, however transaction information is public.
The people behind Ripple insist that they provide faster transaction times than Bitcoin, because there is no waiting on block confirmation and transactions transmit through their network very rapidly.
Ripple and the Securities and Exchange Commission
Ripple was already downtrodden from the selling brought about following the December 12, 2020 airdrop of FLR tokens to XRP holders when it got an even bigger blow. On December 22, 2020 the U.S. Securities and Exchange Commission (SEC) brought a lawsuit against Ripple and its initial and current CEOs. The lawsuit was specifically for raising $1.38 billion through the sale of XRP since 2013 without registering those sales with the SEC.
XRP tokens were already on a downtrend before news of the lawsuit, but afterwards the token fell 25% in just 24 hours. In the week following the news XRP continued falling and by December 27 was 50% below its price prior to the SEC action. That also took XRP out of the third position and pushed it down to the fourth largest cryptocurrency by market cap.
The SEC Complaint
The SEC is claiming that there is a very clear pattern of XRP sales since 2013 that were never reported to or registered with the SEC. Nor are these amounts eligible for any registration or reporting exemption. The SEC claims that this amounts to a sustained practice of illegal sales of unregistered, non-exempt securities under Section 5 of the U.S. Securities Act of 1933.
The case was filed in New York’s Southern District Federal Court, which is the same court that has ruled against Telegram and Kik Interactive in the past. While initially it seems unusual for the case to be brought in this New York court since Ripple is headquartered in California and both of the named individuals are also California residents. However, there is a Ripple office in the Southern District of New York, significant amounts of XRP have been sold to New York residents, and one of the defendants, current CEO Brad Garlinghouse, made certain statements that are relevant to the case when he was in New York. Taken together these make New York suitable as the venue for the case.
It also seems initially odd to see that the former and current Ripple CEOs as part of the case too since it seeks primarily to recover funds for XRP that was sold illegally by the Ripple subsidiary XRP II LLC. It turns out they are being named in the suit because of their significant personal sales of XRP. Former CEO Christian Larsen sold 1.7 billion XRP over the years, while Brad Garlinghouse sold 321 million XRP tokens. The SEC is also claiming the two “aided and abetted” in the sale of XRP by Ripple.
In aiding and abetting the third party knowingly and voluntarily participates in the action that is in violation of the law. In this case Ripple is the primary violator of the law, but both Larsen and Garlinghouse are said to have participated willingly and substantially in the pattern of XRP sales and that they knew there was a goal of raising funds from the sale of XRP without registering the token with the SEC under federal securities laws or of complying with any of the available exemptions from registration.
The complaint goes into detail to describe digital assets and the SEC’s version of Ripple’s marketing efforts towards selling XRP. It also goes on to demonstrate how, in the eyes of the SEC, XRP satisfies the Howey investment contract test that classifies XRP as a security under existing federal securities laws. It also seeks to demonstrate how Larsen and Garlinghouse have participated in the sales efforts.
The primary goal of the suit is to return the “ill-gotten gains” from the sale of XRP. In addition it would also ban Larsen and Garlinghouse from ever selling XRP that is unregistered, and from participating in the future sale of any other unregistered, non-exempt securities. It goes further in potentially blocking both from ever participating in the offering of any digital asset security in the future, and it seeks an unspecified civil monetary penalty from each of the named defendants.
Whether or not the SEC case finds Ripple, Larsen, and Garlinghouse guilty of the charges is up for debate. The suit goes all the way back to the sale of XRP tokens in 2013, yet the SEC did not publicly announce their position that digital assets should be regulated as securities until 2017 as part of The DAO Report. Prior to that Ripple had settled with the U.S. Financial Crimes Enforcement Network, or FinCEN, in 2015 after that organization categorized XRP as a digital currency. Ripple has since been actively working to meet the strictures of the Bank Secrecy Act, operating as if XRP is a currency based on this, which could also play into the decision to penalize the company based on securities laws.
What are the differences Between Bitcoin and Ripple Trading?
- Both are open source – not owned by any one company or any individual
- Transactions for both can be anonymous and free on the internet
- Both Bitcoin and Ripple are decentralized currencies (no banks or approvals needed)
- Ripple is faster in processing transactions and more energy-efficient than Bitcoin
- Bitcoin is owned by a community; Ripple is owned by a private company and its internal ledger is a closed affair
- The total valuation of all bitcoins in circulation stands at approximately $270 billion, while Ripple is at $120 billion
Bitcoin wants to change WHAT we are pay with; Ripple wants to change HOW we are pay.
When trading with AvaTrade South Africa you are trading on the ripple price changes of the digital coin, and not physically purchasing it.
The maximum accumulated position size for Ripple is $250,000 notional value, details in our Trading Conditions and Charges page.
Ripple Trading FAQ
- Will the price of Ripple continue to go higher?
The Ripple cryptocurrency looked like 2020 was going to be a bust as it was up just 24% through the end of October, while competing cryptocurrencies sported gains of 100% or more over the same time frame. That all changed as Ripple rose nearly 300% in November 2020. Since then the gains have partially evaporated as they came primarily from a free airdrop of coins to holders of Ripple at that time. Which has traders wondering if Ripple can return to those November heights. What will really determine if the coin can go higher will be adoption by banks. While that is slowly happening, it hasn’t been nearly sufficient for Ripple to become widely used or in high demand just yet.
- Is Ripple a good cryptocurrency for trading?
In general most cryptocurrencies exhibit a high degree of volatility and are suitable for short-term trading. Ripple is no exception, but typically we don’t think it is the best cryptocurrency for trading. Still, there are times when it can be better than others, such as when it becomes overbought like in November 2020, or when it becomes oversold like in March 2020. In short, there are always going to be opportunities in trading cryptocurrencies like Ripple, but you need to keep your eye on the coin to know when those opportunities are arising.
- What’s the best strategy for trading Ripple?
South African Ripple traders can use many trading strategies and styles to profit from price changes in the coin, but no matter which strategy is used we believe they should all revolve around the use of CFDs rather than going to an exchange and actually buying the Ripple cryptocurrency. There are simply too many risks and confusing steps when you own the cryptocurrency and need to move it from wallet to wallet, or exchange it for fiat currency. Trading CFDs does away with all this and allows the trader to focus solely on the price action and on making a profit.