Ripple is a payment protocol and cryptocurrency created by Ripple Inc. It was primarily designed to facilitate fast and cheap transactions, especially international transactions. Also, the costs of using Ripple are significantly less.
The Ripple platform’s cryptocurrency is known as XRP, and it is already the 3rd largest coin by market cap, with over 10 billion dollars in total. Today, more and more banks and stakeholders are adopting XRP. In this article, the reasons why it is important to understand XRP prices are discussed.
1. To Understand The Impact Of Trading Fees On Returns
Trading fees are the charges imposed on users by an exchange or broker’s service. Naturally, these fees are justified because, without a broker or exchange, there will be a lot of difficulties for buyers and sellers to gain access to cryptocurrency trading. The amount is typically a percentage of the total transaction cost or flat rate.
Trading fees can make a significant impact on returns over time. Every time you buy or sell a cryptocurrency, a fee is deducted from the amount you are investing or receiving. Hence, your net returns are reduced by the trading fees being charged. Most trading fees are considered high by many traders.
To minimize the impact of trading fees on profits, you must carefully decide on which trading platform to use. Also, knowing the price of XRP will help you with calculating how trading fees could affect your returns when trading XRP.
2. Many Financial Institutions Are Adopting XRP
The high interest of the finance world in XRP is no doubt one of the reasons why its prices should be meticulously studied. XRP prices have experienced an upsurge since Ripple Inc. reported notable partnerships with key financial institutions, like JP Morgan. Thanks to XRP’s core technology and cost-effective platform, many financial institutions are adopting it into their core operations. From American Express to JP Morgan to major European banks, there’s no end to the clientele list.
So, how does this warrant understanding XRP prices? Many crypto analysts support the fact that crypto prices rise when there’s a new favorable development towards the adoption of a cryptocurrency. Having said that, XRP being in use by companies of impregnable repute will do wonders for its prices.
3. Its Usability As A Mediator For Currency Exchange
XRP’s usability as a mediator when exchanging currencies is a key reason why it is important to understand the price of XRP. When performing currency exchange, there are often multiple commissions to be paid throughout a series of transactions because many currencies can’t be converted directly to each other. Hence, you have to change the currency to a mediator currency, like Dollar, Euro, or Pound, and, then, convert this to your desired currency. This means you have to pay commissions twice, which can often be costly.
XRP’s cost reducing alternative makes understanding its prices important. With XRP, there is a minimal commission of only $0.00001 on each conversion, which is enormously cheaper compared to other mediator currencies.
4. How Ripple Inc. Can Control XRP Prices
XRP is a pretty different cryptocurrency for the sole reason that all its coins have already been produced. The total number of XRP that has been produced so far is 100 billion. The fraction of this value that is currently in circulation is 41%, with the other 59% locked in escrow by Ripple Inc. Ripple plans to release one billion XRP monthly over the next few years. This approach is an incentive to keep the interest and usage of XRP consistent.
Ripple Inc. can exert a lot of influence on XRP prices. Their huge retention of such vast amounts of XRP ensures this. It means they could inject a high amount of XRP into the market to keep prices stable. This is vital information for anyone looking to invest in XRP.
5. How Government Policies And Adoption Affects The Prices
All currency values have a tendency to be impacted by government policies and in the case of cryptocurrencies, adoption for use. Hence, understanding the subjectivity of XRP prices to government policies and adoption is important.
For instance, South Korea is one country that is big on the cryptocurrency trade. XRP was adopted for everyday use in the country and it did create a rise in XRP prices.
Also, an erstwhile announcement by the South Korean Government on an anti-money laundering bill impacted XRP prices negatively. The announcement stated in part that investors risked their accounts getting frozen if they didn’t comply with the bill. This meant a disruption of the flow of money and people into the cryptocurrency market.
Conclusion
XRP is an innovative cryptocurrency with the potential of becoming a more important payment method in the finance world. Its popularity is on the rise as it is being adopted by more financial institutions around the world.
XRP’s cost-effectiveness, subjection to government policies and adoption, and the effect of trading fees on its prices make it a cryptocurrency worthy of study. If Ripple can build on its existing strong financial relationships, it is indeed a cryptocurrency that is here to stay.
Carolyn Coley is a blockchain reporter. She joined Smartereum after graduating from UC Berkeley in 2018.
