3 Reasons Why Hedge Funds are Backing Ripple (XRP)
Ripple (XRP)–Ripple received some compelling news on Tuesday when it was announced at a CoinDesk event that a 100 Million USD hedge fund would be backing Ripple as its currency of choice for partnered investors. Michael Arrington, founder of TechCrunch, is raising capital for the hedge fund that will “buy and hold crypto assets while making investments in token sales.” The fund, called Arrington XRP Capital, will require that all limited partners make their investment in XRP, effectively becoming the first hedge fund to substitute regular fiat for Ripple. The fund will also disperse payments and fees in XRP.
While Arrington XRP Capital represents the first venture into investing exclusively backed by Ripple, it’s no surprise that hedge funds are using XRP to make their shift into the world of cryptocurrency. Despite being valued at under 0.30 USD, Ripple has amazing potential as a future cryptocurrency powerhouse and instrument for the financial institution.
Ripple is Built Upon a Platform of Usable Technology
The technology behind the Ripple blockchain was invented to improve transaction speeds, costs and security for banks transferring money between banks and across borders. From the beginning, XRP has been designed as a tool that combines the best decentralized principles of Bitcoin with a purpose that benefits existing financial entities. While the average investor has access to Ripple through crypto exchanges, the heart of Ripple is in the banking conglomerate and other bank-related institutions. American Express has already adopted Ripple for U.S.-U.K. based money transfers. Other enterprises are now finding ways to use XRP for liquidity in cross-border transactions and the conversion of fiat. It makes sense that the next step for Ripple would be in the establishment of an entirely XRP based investment fund. As Arrington pointed out, previous crypto-backed hedge funds have had to contend with the delay in receiving fiat and then converting it into a coin of choice, typically Bitcoin or Ethereum. Volatility in the marketplace can cause a significant change in the period between fiat transfer and conversion. By valuing the fund in XRP from the beginning, Arrington XRP Capital is in prime position to respond to changes in the cryptomarketplace. Ripple is fast, cheap and can easily be converted into any coin on the market.
Ripple Provides Relative Security Compared to Other Options
The financial institution’s coin of choice, currently ranked 4th in total market cap value, is not going away any time soon. Ripple is gaining support among banks and banking-based companies at a rate that assures it has a future in the world of cryptocurrency. Even if banks forgo the use of XRP as liquidity, thereby bringing into question the value of the XRP coin, announcements like Arrington XRP Capital provide an avenue for Ripple to hold a keystone position in the changing financial landscape. Massive companies like American Express are not going to back a blockchain-based technology they feel does not have long-term potential and viability. Even with Bitcoin reaching all-time highs and a consistent march in profits, the market of cryptocurrency is highly volatile and vulnerable to correction. Ripple is a currency that not only seeks to build value with the average investor as a decentralized means of exchange, but also as a tool for banks to save money and improve upon their current methodology. That, combined with a sturdy present market cap, makes Ripple a relatively safe investment for the long-term. As noted before, the banking industry will value low volatility as they put more weight behind cryptocurrency. This creates a strong base of support for Ripple in the event that prices begin to fall, while still providing upside for deflation and increased value.
Ripple is Still Undervalued
Let’s assume that the company behind Ripple proceeds with its promise to move 55 Billion XRP into escrow. At a max supply of 100 Billion coins, that leaves a total circulating supply of 45 Billion XRP. Bullish predictions are pegging Ripple’s price-per-coin around $1 in the coming years, which would require a market cap of $45 Billion. Consider this: Ripple is currently commanding a market cap value of $10 Billion, versus a total cryptomarket of $300 Billion. The market has been adding $10 Billion per day in the last week alone, with analysts calling for cryptocurrency to rise into the Trillion dollar range as early as next year. Ripple is guaranteed to benefit from the rise in dollars invested in crypto, and in prime position to see massive gains as average investors and banks alike look for a secure coin to buy into. If you believe in the future of Ripple, then any price point under $1 can be considered an undervalued price, with the potential of even greater returns hinging upon how the XRP coin is utilized in transactions.
Either way, the future of XRP is looking better with each day.