With its native cryptocurrency XRP, Ripple is definitely one of the early winners of 2020. XRP was able to free itself from the clutches of the long downward trend of 2019 and bounce back with a vengeance. While XRP still stood at just under $0.18 in December, it peaked at $0.34 in mid-February.
Aside from the fact that this was almost a doubling, Ripple was also able to outperform Bitcoin. Currently, Ripple stands at $0.276 and is back below the important $0.30 mark but is still up 43% overall in 2020.
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A few weeks ago, Ripple announced that the company could go public (IPO) within a year. This will also have an impact on the XRP price. Of course, this raises the question: Will it be an opportunity or a disaster for crypto investors?
A death blow for XRP?
This isn’t an easy question. In the wake of the announcement that Ripple’s IPO is to take place, the XRP price showed no significant reaction. Nevertheless, many crypto experts think that the IPO could have more negative than positive consequences. From the investors’ point of view, for example, the question arises as to why Ripple needs an IPO at all.
The company is already generating good profits from XRP sales and was able to collect an additional $200 million from investors at the end of 2019. Either an initial public offering could bring even more money into the coffers, which the company does not need directly, or Ripple has exorbitantly high expenses.
Ripple is at the mercy of investor’s expectations
It must also be taken into account that Ripple is at the mercy of investors’ expectations with an IPO, which could, of course, increase the pressure on the XRP price. If these expectations are not met, XRP could also fall. A regular point of criticism from the entire crypto community is the question of whether Ripple necessarily needs XRP as cryptocurrency at all.
Allen Scott, the Head of Cointelegraph Markets, even thinks that the IPO could become a test of XRP’s existence: “Therefore, this could indeed harm Ripple – it would put into question not only its operating costs and its business model of dumping [of XRP] on the market but more importantly, the existence of XRP.”
Ripple IPO as XRP price driver
However, this assessment is counterbalanced by positive opportunities. For example, Ripple could use the money raised by going public to invest more in the infrastructure of its network or the like. In the long term, this would of course also benefit the adoption of XRP and then the share price. Another very important point is that with the fresh capital Ripple would have less reason to sell it’s up to 1 billion XRP per month from escrow.
In the past, this practice has often been associated with the long dry spell and the decline of the XRP price. Should Ripple sell less XRP as a result of the IPO, it would be clearly bullish. Marti Greenspan, the founder of Quantum Economics, agrees: “I have the feeling that this would be positive. Additional funding for Ripple would mean fewer reasons to sell tokens.”
No clear direction
The question of whether the XRP price will go up or down as a result of the Ripple IPO cannot be clearly answered conclusively. There are both reasons for a rally, but also some for a crash.
The fact that the XRP price showed little reaction around the news release does not make a forecast any easier.
Another possibility is, of course, that the IPO will have no effect on the share price at all, although this is rather unlikely. So it only remains to be seen what will actually happen. Investors could benefit from both a suitable strategy and a reliable partner.
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First published in CRYPTO MONDAY, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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