Ripple (XRP) is quickly becoming one of the more popular cryptocurrencies for transferring funds across borders.
It’s fast and has lower fees than other cryptocurrencies. The massive market cap of Ripple (XRP) basically proves that it’s a popular cryptocurrency.
But it does have one issue – it requires a high price for maximum efficiency. This article will explain why Ripple (XRP) works best with a high price. However, to fully understand that, you must first understand the purpose of Ripple (XRP).
Anyway, this article will cover everything you need to know about the mechanics of Ripple and how the price impacts the cryptocurrency.
What is the purpose of Ripple?
To truly understand how the price impacts Ripple, you must first understand the purpose of Ripple.
Basically, Ripple (XRP) is a cryptocurrency designed for financial institutions to transfer currency in an efficient manner – it’s more affordable and faster than the normal tools used for financial transactions.
This makes it a little different than most cryptocurrencies that are designed for use by consumers, but in practice are treated as a tool for speculators to make or lose money.
Advantages of Ripple Having a Higher Price
Here are some of the advantages of Ripple having a higher price. Really, there is one main advantage of Ripple having a higher price and the other reasons are secondary to the main reason.
More Efficient Transfers
If Ripple (XRP) has a higher price, then it means less coins are required to transfer money. This results in a more efficient system, which means faster transfers and lower fees.
That really is the main reason that Ripple (XRP) needs a higher price. That said, Ripple (XRP) works fine at a lower price. It simply works better at a higher price.
The other advantage of Ripple (XRP) having a higher price is more gains for those that held Ripple (XRP) before the price increase.
This, of course, is a one-time advantage. But it is worth mentioning that a 100% increase in less than a week is a huge advantage.
Higher Market Cap
Finally, a higher Ripple (XRP) price results in a higher market cap. This does not impact the blockchain, but it does result in more name recognition for Ripple (XRP). All that name recognition does help the price and could even sway more institutions to begin using Ripple (XRP).
Again, this is a secondary benefit of a higher price, but it’s worth mentioning. A higher price is almost always preferable to a lower price.
The Problem with Ripple Having a Higher Price
There is one problem with Ripple (XRP) having a higher price. And this reason does have a big impact on the use of the currency, so it’s important to mention.
More Opportunity for Massive Price Fluctuations
The problem with a high cryptocurrency price is that high priced cryptocurrencies have a tendency to have large price fluctuations.
Just look at Bitcoin for an example.
Ripple’s price has hovered around $0.30/XRP for a long time. It did not move much in either direction. Think about it, there is not much room for the price to drop and the price rarely rises.
That works out great for the banks that use Ripple for money transfers. Why?
Banks do not like risk – they want to use currencies that have the potential to lose half their value in a week (ie. Bitcoin).
Stable Price Is More Important to XRP Than a High Price
The main takeaway you should get from this article is that while a high price is nice for the blockchain it’s not necessary for the blockchain to function.
However, the main customers of Ripple – banks – are concerned with the price remaining stable more than an extra few seconds on a transfer. Ripple already does transfers much faster than normal, so the extra few seconds is simply not worth the risk from a fluctuating price.
Is Ripple (XRP) a good investment?
The next logical question after learning Ripple works better with a higher price is, “Is XRP a good investment?”
The answer to that question depends on what you want from your cryptocurrency investment. Do you want the potential for massive 500% gains?
If you do, then Ripple might not be the best choice. Sure, it has big gains when positive news is released, but outside of that the price is mostly flat.
Remember, banks do not like price fluctuations.
Where to purchase Ripple (XRP)?
If you are interested in purchasing Ripple (XRP), then you are in luck – it’s an easy cryptocurrency to purchase.
Every exchange has a Ripple/BTC trading pair. And most exchanges have a Ripple/fiat trading pair.
However, we recommend purchasing Ripple (XRP) on Coinbase Pro. Coinbase Pro is the trader focused version of Coinbase. This means lower fees than Coinbase and the ability to make orders as a market maker.
If Coinbase Pro is not an option for you, then Binance is another great option. The fees on Binance are actually lower than Coinbase Pro, but Binance is mostly a cryptocurrency to cryptocurrency exchange.
We hope that explains why XRP needs a high price. It’s mostly about the efficiency of the blockchain.
That said, XRP does not need a higher price to function. Rather, it needs a stable price to effectively serve its purpose of transferring funds across borders.
With that in mind, a high, stable price is the best for XRP. And we do expect the price of XRP to rise, albeit slowly, over time to make a more efficient blockchain.