If you are buying a digital asset, it’s often difficult to choose, especially if your knowledge or experience is limited. In this piece I’m going to go through a few of the decisions that I made and talk about how and why I arrived at XRP as my coin of choice. I’m no expert, I could be super wrong but I don’t really care either way – buyer beware etc!
Choosing a Digital Currency
What coin/token should you choose when venturing into digital currency? – Crypto currencies generally, have seen massive speculation and interest in 2017 with many increasing to unseen heights. Various financial publications have talked of ‘Bubbles’ and inevitable crashes and yet, each time we’ve seen a dive, there’s usually been a recovery in the days and weeks that follow.
We can speculate around the reasons for price rises and falls and draw all manner of conclusions. In my investigations I encountered various theories; classical economic theory of supply and demand and scarcity of resource – pump and dump, wide consumer adoption helped by media frenzy and assisted by low interest rates and dissatisfaction generally with investment returns.
Coin Ownership – Who Owns What
There are a few crazy stats on bitcoin for instance.
60% of all bitcoins are owned by 0.06% of BTC addresses.
That’s a pretty concentrated holding, with a lot of power to drive the price up or down at a whim.
Of course, a few of the addresses referenced are those that sit on the big exchanges.
Many people keep their coins on exchanges, so the perception of a core group of individuals holding all the levers may be a little out, the truth is we just don’t know, but the big numbers are aligned to singular addresses and there certainly aren’t that many big exchanges around, so individuals/organisations are HODLing large bitcoin assets.
When we look at big market price moves, we will see that many of these have been driven by the movements of a select few minority addresses. We also don’t know if these are simply whimsical, or the result of concerted collusions.
There are no rules or regulations governing bitcoin and people are pretty free to do what they like.
LTC is a great example of how singular HODL’ers can move the needle – The LiteCoin creator Charlie Lee said in a Reddit post that he sold his LTC holdings from around the 18th of December.
We can see how the LTC price fell over the days that followed, losing a big percentage of its price.
Of course correlation isn’t necessarily causation but it certainly doesn’t help when a major HODLer decides to UnHODL (I’m having fun with this hold word) as the crowd senses an issue so follows accordingly.
Big sells cause big red candles, and big red candles can create panic amongst lesser holders who then lose their nerve and follow suit.
Here’s a chart for the same period for bitcoin.
Different yes, and some argue that the bitcoin movements have a knock on effect on the other alt coins as people sense a shift back down to a lower price than where we are today and this is borne out to some degree when we overlay the major coins on any chart.
Here’s a logarithmic chart showing movements for the past 12 days with Ripple bucking the trend line.
Here’s the last year or so.
So, rightly or wrongly I concluded that there’s of course lots of volatility across the board and that generally, bitcoin has led the way with the various rise and falls, with the cynical me (go look at the blockchain) thinking that many of the large HODL’ers have had a fun time driving the price up (and down) helping contribute to the point of where we are at today.
The game for the day traders is of course buy in the dips and sell at the top, and if you happen to have a large bitcoin holding with the ability to create such flux then why wouldn’t you? It’s a reason why traditional securities have rules like no insider trading and the like after all.
Accessible Price Points And Insane Valuations
Lots of people, (me included) find it difficult to get their heads around the concept of how something that is effectively bits and bytes with no real tangibility could possibly be valued so highly but of course, things are only worth as much as people are willing to pay for them so clearly, lots of people think it’s worth it and have enjoyed being a part of an upward price trend.
The psychology of people who hold bitcoin is another aspect of it all.
Many people are almost zeal like in their belief around how bitcoin is going to revolutionise the world and take power away from banks and governments and the very powerful.
I’m not going to get too deep in to any of that here (my view is it’s more about blockchain tech than the coin) but it’s an interesting aside. I suggest going to read a few of the competing theories and make up your own mind.
So for me, I didn’t want to buy something that had limited room for growth and was open to such wild manipulation. I was too late to the party to play that game. That said, you’ll find people like John McAfee talking about bitcoin hitting 50k USD in March of 2018; so there’s still a whole lot of people talking it up. It’s also now available in the futures markets of a couple of big trading floors, so it could of course continue to rise. Playing wait and see could be expensive/fruitless/a waste of energy so I’ve opted to opt out.
I could of course take a massive risk and liquidate my assets and buy a few bitcoins and laugh manically when they reach 50k, or I could cry when it falls to a rate much much lower than it is today. Either way, I’m not in the crazy gamble market, so I’ve opted to leave well alone and go for a coin that (for me) has more potential.
So why choose XRP?
XRP for me is affordable with a low entry price point and IMHO offers a whole lot more potential return.
I first bought in at around 54p per XRP and have made subsequent purchases at 95p and 1.60 (for a neighbour).
Its founding company Ripple is currently valued higher than UBER.
It’s currently the number
3 2 coin in the digital blockchain space.
Ripple have made a few astute hires of late and their strategy is one of selling their blockchain tech to large financial institutions as a means of reducing the friction and speed of transaction costs. The Bank Of England has used Ripple to test a proof of concept.
We successfully integrated the Ripple solution with two simulated RTGS systems, hosted in the cloud, and demonstrated that we could process a successful cross-border payment across two RTGS systems simultaneously. We also demonstrated that an attempted cross-border payment that failed validation on the receiving side would not be honoured. source
XRP, their token is the means of exchange around this.
Blockchain as a concept of course solves many of the classic “man in the middle” issues of traditional means of exchanging.
It’s fully traceable, it’s transparent and fast.
It can be applied to almost any kind of digital transaction and is only likely to grow in use. Politics (voting) and money are two of the biggest potential applications, cutting out a shedload of inefficiencies.
From a money perspective, I concluded that for big finance houses, banks, pension funds, investment houses or whatever else you want to call them, the thing that might matter the most to them is reliable technology and relative stability of price.
Of late, bitcoin transactions have been taking (in some cases) up to an hour to process.
The costs of each transaction have rocketed too, making it pretty unattractive for many smaller players looking to get involved. The huge rise and falls in price are also unpredictable and in the hands of a colluding few (individuals/exchanges/intermediaries) are open to all manner of games and shenanigans.
Contrast that with XRP and it’s all a little different.
It offers relative stability, isn’t as easy to manipulate (yet) has lightning fast transaction times, and relatively low transaction costs.
I don’t really care if it’s a singular company with centralised control. I don’t care if it has 55 billion locked up in Escrow for the next 5 years (I quite like that actually) because I’m not some kind of digital warrior or super power investor. I’m just an ordinary Joe looking to do well with something that could.
So, rightly or wrongly, those are the reasons why I’ve opted to go the XRP route. Only time will tell, and ultimately; I’ve been sensible and measured. If it all turns to mud then I’ve lost an amount I can afford and if it does the obverse then I’ll do very well indeed.