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Ripple Mania: How Big Can the Bankers’ Cryptocurrency Get?

Last Updated March 4, 2021 5:03 PM
Joseph Young
Last Updated March 4, 2021 5:03 PM

For a brief period of time, Ripple overtook Ethereum to become the second largest cryptocurrency in the global market behind bitcoin, with a $72 billion market valuation, on December 29.

Ripple Mania in South Korea

Since then, the market cap of Ripple has fallen slightly from $72 billion to $70.3 billion, allowing Ethereum to regain its position as the second largest cryptocurrency.

It is the second time this year that a cryptocurrency has overtaken Ethereum in market valuation. In November, Bitcoin Cash briefly surpassed the market valuation of Ethereum, during a period in which the SegWit2x hard fork proposal was rejected by the market and the majority of SegWIt2x supporters moved to Bitcoin Cash.

At the time, Buterin wrote:

Over the past few weeks, CCN.com reported on several occasions that the demand for Ripple from South Korea and Japan are fueling its price growth. At the time of reporting, the price of Ripple in South Korea remains above $2, more than 10 percent higher than the global average price.

The demand for Ripple has surged in the two countries because of the partnership between Japanese banks led by SBI Ripple Asia and South Korean financial conglomerates to integrate Ripple’s blockchain-based technologies by January 2018. Ripple Labs and the developers of the Ripple network expected many billions of dollars to be processed on the RIpple network on a regular basis.

Price of cryptocurrencies on Korbit

As Korbit founder and CEO Tony Lyu told Nathaniel Poppers of The New York Times, once investors in the South Korean market are optimistic about a certain asset and its value continues to increase, every trader in the market moves towards that particular asset. The South Korean cryptocurrency exchange is very strongly affected by FOMO or fear of missing out.

“Word just spreads really fast in Korea. Once people are invested, they want everyone else to join the party. There’s been this huge, almost a community movement around this,” said Lyu.

Last month, the South Korean market rallied behind Bitcoin Cash, pushing the price of BCH in the local market to $3,700. This month, Ripple has been the focal point of the portfolios of South Korean investors.

Peter Brandt, an experienced and highly respected trader, stated  that any investment or trade by FOMO is discouraged and it is an emotion which investors should not reflect on their trades.

“In my opinion, FOMO is one of the absolute worst emotions a trader can possess. I cannot count the number of traders I know who tapped out over FOMO. Learn to resist it or it will bury you,” said Brandt. “It’s my contention that many cryptomaniacs misunderstand FOMO. Markets thrust higher not because of buying from FOMO, but markets sense those with FOMO are missing out. When mass FOMO finally throws in the towel to buy its a top of some scale.”

Also, in a minor market like South Korea, cryptocurrency investors often look for reaffirmations by prominent traders or institutions to justify their trades. For local traders, the wide adoption of RIpple by leading banks has been a go signal for investment.

Is Ripple Sustainable?

Earlier this year, Ripple processed $180 million for Swedish bank SEB. If Ripple can process many billions of dollars on a daily basis on behalf of its partner banks, the high market cap of Ripple can be justified.

However, the market cap and price of Ripple should not be justified by TAM, or total addressable market, but rather with actual transaction volumes and user activity.

Featured image from Shutterstock.