XRP, the native token of Ripple, the international money transfer company, has not been doing well in the cryptocurrency market for long now. According to an analysis by global cryptocurrency exchange OKEx, this is due to several reasons which many XRP fans probably don’t know about.
The first is that XRP is mainly used as a source of liquidity to make international money transfers. The problem with this, according to OKEx is that it makes the cryptocurrency of little use since it is not used as a medium of exchange like Bitcoin. Part of the analysis reads:
“Although there were more than 100 financial institutions have been using Ripple’s RippleNet and RPCA to move money globally, however, the majority of them did not use XRP as a medium. That means institutional adoption of XRP remains relatively low, and that won’t produce any help XRP in terms of having positive price actions.”
Another reason cited by OKEx is the fact that competition is building up in the XRP use niche. Ripple is certainly a top remittance settlement platform with more than 100 financial institutions.
XRP however still doesn’t seem to be making headway in the market because there is stiff competition in the industry as other companies keep getting into the cross-border payments business.
For instance, JP Morgan-launched JPM Coin and the more recently launched Libra by Facebook alongside traditional companies such as SWIFT and the latest FedNow announcement by the Federal Reserve are all-powerful competitors that could make Ripple lose ground.
Also comparing XRP to Bitcoin, OKEx mentioned that the massive 100 billion total supply of XRP is a major reason why price does not go up due to overly abundant supply. This is because unlike Bitcoin, XRP is not mined and over 42 billion XRPs are already in circulation as Ripple controls almost 60% out of the total 100 billion supply which are locked in escrow.
Bitcoin, on the other hand, has a total supply of 21 million and is released a little at a time by miners, giving price enough time to go up.
With these factors combined, XRP is in a tight condition and though it is great for payments, it may not see any significant price growth until institutional interest is attracted. Until then, the hope of XRP reaching some high price as expected by its holders and fans may never be realized.