Problems are mounting for Ripple, as XRP support shows signs of dwindling throughout 2020. Lawsuits, losses of talent, and drops in engagement have punctuated a testing year for Ripple, but is there any way back for one of the world’s largest cryptocurrencies?
According to CoinTelegraph, support for Ripple reached new lows in early 2020 as a quarterly report showed online engagement towards XRP had fallen dramatically in Q1 of the year. During the same time, Ripple was forced to liquidate a large volume of its holdings in order to stay cash-flow positive.
Highlighting a collaborative report by eToro and The Tie, it was revealed that the number of Twitter users discussing XRP fell by 16% in the first quarter of 2020. Elsewhere, avid supporters of the cryptocurrency, known as the “XRP Army” declined by as much as 82% since the start of 2018.
This wasn’t the first time a loss of support for Ripple had been reported. One social media user created a list of Telegram groups in April 2020 that showed over 63% of @Ripple members had jumped ship since June 2018.
Although it’s unfair to suggest that drops in engagement online can be linked to losses in adoption and subsequent coin value, the chart above indicates a strong correlation between social media relevance and XRP price.
During the first quarter of 2020, Ripple was overtaken in terms of daily volume by Chainlink and has lost its spot in the crypto top three to stablecoin Tether at the time of writing.
Despite the volatility of crypto markets within the testing era of Coronavirus, XRP had long been considered as the worst performer of the large-cap crypto tokens.
In 2019, the Tie reported that Ripple was forced to rely on liquidations to remain cash flow positive: “While Ripple liquidated only $13M worth of its XRP holdings in Q4 2019 (the least in three years), it sold over $250M worth in Q3 of last year. It is not yet known how much XRP Ripple sold in Q1 2020.”
The vast level of liquidation is likely to revolve around lawsuits filed against Ripple. In April, CEO Brad Garlinghouse was accused of peddling XRP to investors while cashing out his holdings.
More recently, XRP found itself in more trouble with Puerto-Rico company Bitcoin Manipulation Abatement LLC filing a lawsuit that accuses Ripple of misleading investors by driving false demand.
2020 also saw key players behind XRP leave, including Head of XRP Markets, Miguel Vias, and engineer Evan Schwartz, who helped the organization develop the Interledger Protocol (ILP).
One of the most notable fears surrounding Ripple revolves around the fact that new players in the crypto landscape could threaten the existence of XRP.
Ripple was initially developed to be a highly accessible crypto asset that could be transferred between accounts with ease. Today, XRP’s role as a remittance coin is losing traction as stablecoins have entered the fray and DeFi programs are beginning to make financial services increasingly straightforward with different tokens.
Regarding DeFi, a recent combined report by both Bitstamp and Coinmetrics has offered a reason why XRP is finding itself increasingly crowded out, stating that “stablecoins can serve as replacements for fiat onramps and provide liquidity for crypto investors who do not have a direct fiat gateway. This is especially important in countries that have relatively strict restrictions on crypto asset trading, like China.”
“Past research has shown that USDT_ETH is predominantly transferred during Asian and European market hours,” the report concluded.
An Abundance of Competitors
In recent times, Ripple looked set to become the technologically advanced fresh blood on the crypto market. Boasting swifter transactions than Bitcoin, and lower costs to boot, it looked as though XRP could be adaptive enough to become a practical cryptocurrency where users could feasibly use the coin in everyday life.
Following on from a promising start to life, Ripple finds itself crowded out by like-minded projects both inside and outside of traditional cryptocurrencies. Exchange rates from Monero to Dash show that there are more coins than ever that are focused on maintaining a consistent and practical value to facilitate smaller transactions.
The largest competitor for Ripple, however, comes from the emerging threat of DeFi. Known as decentralized finance, DeFi offers users the ability to broker smart contracts without the need for any paperwork or middlemen. It represents a significant step taken by blockchain technology and the realization of the more practical uses of distributed ledgers and digital currencies.
However, Ripple has been slow to embrace this exciting new crypto ecosystem. However, in a bid to galvanize the ailing XRP token, this may all be about to change.
Adapting to Survive
In the summer of 2020, Ripple’s chief executive technology office, David Schwartz confirmed that XRP is exploring ways to offer DeFi services to its users.
In an interview with BlockDown TV, Schwartz confirmed that Ripple was “looking into offering other services through RippleNet – things like loans, or maybe even if DeFi grows, offering DeFi services to institutional partners.”
The CTO, who was one of the original founders of the XRP ledger, hopes that RippleNet can evolve to become a one-stop-shop and a leading choice for institutions in making payments in the near future.
With pressure mounting on Ripple to adapt and survive the latest influx of competition, evolving to accommodate DeFi solutions may ultimately be the embattled XRP’s only way of avoiding extinction.