The cryptocurrency is known for its volatility. Potentially new investors straddle the fence all the time, wondering if it is time to join in on what is becoming a global movement. Part of that decision comes down to knowing what factors will cause a shift in price for the cryptocurrency they are monitoring.
When it comes to XRP price, it is vital to have all of the information. Compared to other financial entities like real estate, there are extreme highs and lows that come with investing in cryptocurrencies. What is XRP and what are the factors that play the largest role in the token’s price?
What is XRP?
XRP is the native cryptocurrency token of the XRP Ledger. Part of the Ripple Network, this open-source blockchain was created to institute low-cost, fast financial transactions, including cross-border payments. Though it shares similarities with many major cryptocurrency tokens, there are important differences.
For starters, XRP doesn’t make use of a mining process, releasing “pre-mined” tokens over a certain period of time. Ripple develops the core technology but doesn’t actually own the aforementioned XRP Ledger, nor XRP itself. Another major selling point is that XRP is much more environmentally friendly compared to Bitcoin and Ethereum because it requires far fewer resources to complete its core processes.
Supply, Demand, and Utility
A major factor when it comes to determining XRP price is knowing the role of supply, demand, and utility within the Ripple network. With a fixed total supply of 100 billion tokens, there is a finite limit for XRP and it is all theoretically available sooner than Bitcoin, which still requires mining to create the remaining BTC tokens.
Demand tends to come from a trio of sources. Speculative trading, particularly on sanctioned exchanges, is a big factor. The ability to facilitate cross-border payments through RippleNet partner is also key. Finally, there is the ability to garner institutional investments, which ultimately creates investor confidence.
The ability of XRP to act as a utility token is crucial as well. Because XRP offers fast, low-cost transactions, it becomes appealing to payment processors and banks. This increases the chance of it becoming available in more real-world use cases.
Regulatory Impact
Another major factor that has an impact on the cryptocurrency market at large is the current regulatory climate. Previous lawsuits with the Securities and Exchange Commission (SEC) have already had a negative impact on XRP price, for instance.
Though the current U.S. presidential administration is pro-cryptocurrency, potential investors remain reticent to invest until there are greater protections in place to reduce volatility. With further institutional investment, investors confidence improves and potential volatility for that token drops as well.
Market Hype and Institutional Adoption
Among the other major factors impacting the price of any cryptocurrency is market hype and institutional adoption. The more that banks and other payment companies begin joining RippleNet and using it as a bridge currency, the stronger the interest in XRP.
Like any other token, XRP price can be influenced by social media trends and hype among investors. Price spikes tend to come when someone influential plugs a token. We have seen it in the meme coin space of late, but it is possible for a social media trend to bolster the price of a particular token.
Making ecosystem upgrades can also help the price of a token as well. Improving speed and scalability are always beneficial, and it helps the XRP Ledger stay ahead of the competition. With each major update, there is an impact on the overall perception and price of a token like XRP.
