If there's one thing that all securities traders want, its insight into future events, expectations, and probabilities. If only we crypto traders could see the future, each of the many parabolic price leaps in the crypto space would be revealed, and we'd have the opportunity to stock up on the ones with the greatest returns.
There's many different ways to predict future price of a commodity - any commodity. This includes crypto-currencies like XRP.
Technical AnalysisNot long ago during one of the many times XRP price has "gone parabolic" this year, somebody used the term "Elliot Wave" to describe a pattern of price behavior. I was skeptical at the time; the poster was predicting an even higher price for XRP after two consecutive rallies.
He was right.... the price actually surged a third time.
The Elliot Wave was a theory proposed by Ralph Nelson Elliott.1 The concept is a strange one rooted in the observable social phenomenon of crowd psychology; it is possible to predict the behavior of investors when they encounter a security or asset whose price has risen substantially. When a security or asset first encounters investor enthusiasm and responsiveness, it will benefit from two more waves of interest, normally pushing the asset to new heights peaking at the third wave.
These types of concepts only study the behavior of investors. When combined with data feeds about volume, time, and price, it all forms the foundation for technical analysis. Technical analysis is focused on providing short-term price predictions.
Technical analysis doesn't concern itself with cause or long-term value. It only looks for strong correlation, and then serves to project expected price increases or declines along different trajectories of probability.
Recent Technical Analysis of XRPAnecdotally, several posters on the XRP Discord Channel have been posting about how their most recent technical charts are indicating that XRP is visiting "higher lows and higher highs" in the past several weeks. This support at higher price levels indicates a general short-term upward trend in price for XRP.
Poll ResultsOne way to get a feel for short-term price predictions is to take a poll.
On Friday, October 27th, I started a poll on XRPChat2 that asked:
To answer the poll, a user had the option of selecting individual price categories. In 24 hours, 162 individuals voted.
"What is the HIGHEST price that you expect XRP to reach prior to the end of 2017 - i.e. the remaining two months of this year?"
- The three categories comprising the twenty-to-thirty cent range virtually tied, with only one vote separating all three categories.
- Most telling? 48% of all voters thought that the price of XRP would reach a level somewhere above 31 cents in the final two months of 2017.
Utility AnalysisIn early June, a fellow XRPChat member alerted me to a blog that had been written by an anonymous poster under the pen name "Izzy Otto." The blog entry focused on a price prediction for XRP based solely on demand created by the usage of XRP. 3
This is a type of price prediction I've dubbed "utility analysis" because that's exactly what supposedly forms the basis for the resulting price prediction - the analysis of the actual utility of the digital asset.
Say what you want about his analysis; but keep in mind that he correctly identified possible legal issues with Chinese Renminbi- Bitcoin trading three months in advance of China's restrictions.
In any case, he predicted that banks, financial institutions, brokers, dealers, and others would need approximately $92 Billion dollars' worth of XRP by the year 2020, just for business-to-business cross-border transfers.
I think some of his base calculation numbers are too low; I would start with the amount of business SWIFT handles (1.8 quadrillion per year), and then extrapolate a percentage of that to start. Instead, Izzy Otto only focuses on "business-to-business" cross-border payments set at 207 trillion.
He then adjusts downward even more using a projected percentage of the smaller market.
What number does he end up with? $1.43 per XRP based on 2020 utility for only business-to-business cross-border transfers.
Note: If he'd used a percentage of SWIFT's larger number, the utility estimate would have been roughly $12.60 per XRP. Remember that SWIFT's number includes all cross-border payments, not just business-to-business payments. I believe that this number is more accurate, since Ripple is targeting the entire cross-border market, not just business-to-business.
These utility estimates purposefully don't take into account other very significant factors such as speculation and investment; Bitcoin's primary utility thus far is as a store of value. What is Bitcoin's current market capitalization? $93 billion - based primarily on speculation as an investment.
Do Not Underestimate SpeculationAs we can see from Bitcoin, the power of speculation seems to trump all other factors for digital assets and crypto-currencies.
Yes, XRP has the most potential utility of all crypto-currencies. It could be used on a scale that would dwarf usage by all other digital assets; the market for SWIFT payments is currently measured in the quadrillions.4 If XRP handles just a small fraction of that amount, the utility analysis that Izzy Otto presents can be placed aside as a unique footnote in XRP price history.
But speculation dwarfs utility-based demand.
When a market perceives a digital asset to contain high value, or have potential for real-world usage, it rewards it with a high base price; but what is the ingredient for quarter-after-quarter demand increase? Volume and liquidity, combined with the ability to promote the brand name of the digital asset.
XRP has both of these ingredients in large amounts.
Ripple Knows How to Promote XRPOne of the reasons I am so overwhelmingly confident in my XRP investment is the recent history behind Ripple's promotion of XRP. While emphasizing how much their business strategy is centered around their digital asset, they've carefully taken a soft approach with banks to jump-start the adoption of Ripple technology in general, using ILP to connect banks' ledgers together. They've sponsored RippleNet, a collection of banks and financial institutions that are connected together using Ripple technology to make instant payments.
And now they're rotating xRapid into the mix.5
xRapid is the software suite that provides liquidity to banks in the form of XRP. This is the final step in providing a low-cost alternative for banks that want to streamline their nostro-vostro accounts in foreign countries and use XRP to achieve the lowest possible costs of making international payments.
As an extra incentive, they've created the RippleNet Accelerator Program6 to reward the first banks that chose to be trailblazers in utilization of XRP for international payment.
SWELL's Impact is Still UnfoldingWhen banks now think of cross-border transfers, they think of two organizations: SWIFT and Ripple. Do not underestimate this achievement. As soon as I learned of Ripple's plans to organize and host SWELL, it was a "game-over" moment for me internally. It was a signal that the next phase is now here; they are about to grab a portion of SWIFT's market share.
April-May 2017 Was Not an Isolated OccurrenceThe power of speculation is something that was overwhelmingly visible during April and May of 2017. The entire crypto market expanded to a new size, and has temporarily plateaued at the current investment levels.
This is the calm before the next storm. Hedge funds7 have signaled their intent to start investing; although the market hasn't seen these fund amounts yet, it is my firm belief that the groundwork is being laid as we speak to streamline future offerings. Remember that just because Bitcoin was denied an ETF license here in the US8 doesn't mean it won't be approved in foreign markets.
Mainstream retail investors are tired of being kept out of the crypto market. It's 2017, and yet I still can't purchase crypto-currency on a traditional securities exchange here in the US? I predict that 2018 will be the year when nations start competing with each other to be the most "fintech-friendly" locations.
Crypto is Not in a BubbleSome would have you believe that crypto is in a bubble. Others from mainstream finance that do not understand crypto-currency have used inflammatory words like "fraud" to describe Bitcoin; to me this is a symptom of society finally coming to grips with a new innovation.
Here is a revealing graphic that is one of my favorites (the Bitcoin size is from two months ago, but you get the idea):
Market Capitalization Price PredictionsThe current market capitalization of all crypto-currencies is listed at $169 billion.9
What is the "true" target for where we can expect crypto-currency market capitalization to peak and ultimately plateau? It depends on who you ask. Most of the predictions center around a multiple of $trillions.
One recent prediction was approxiamtely 2 trillion dollars.10 A more bullish estimate put the number closer to 5 trillion.11
Now, if you subscribe to the 2 trillion dollar market capitalization prediction, then think of what it means from a perspective of just raw mathematics. Set aside utility analysis. For now, lets just multiply the current price of our favorite digital asset by the same multiple that would bring the current crytpo market to $2 trillion: (2,000/169 * .2)
Resulting XRP price: $2.37 per XRP.
What Do Ripple Employees Predict for XRP?Of course, it's always fascinating to examine what Ripple employees themselves think about the price of XRP. Are they buying? Are they selling?
In June, an ex-employee of Ripple communicated to me that he was not planning on "living off of his XRP" until it went up much higher - and he seemed completely confident in this assessment. While official company statements are important and can make a positive difference, sometimes hearing these sorts of comments from ex-employees can be a profound testament to Ripple's business plan and the probability that they will be able to achieve a significant level of success in their endeavors with XRP.
While Ripple employees stay away from specific point-in-time predictions - with good reason - they have not shied away from conducting some ad-hoc analysis on social media occasionally.
David Schwartz (Ripple's Chief Cryptographer) wrote up a short piece on Reddit12 about different price possibilities for XRP given certain scenarios. His estimates ranged anywhere from $2 to $120 dollars. And he makes a very insightful statement near the end:
"Ripple equaling bitcoin's current market cap sometime in the near future doesn't seem any more outrageous to me now than the idea of a bitcoin selling for over $1,000 seemed to me in 2012."The market may look back on this statement as a very prescient estimate of where XRP's trajectory may lie; as XRP is adopted for actual production usage by more and more banks, the current market capitalization of Bitcoin may be just a footnote in its path to exceeding all of these price predictions.
Invest in ValueRegardless of which prediction you adhere to, it's best to keep in mind that crypto-currencies don't need to be a high-risk investment any more. With XRP as a choice, traders can invest in a digital asset with a solid use case behind it. As more and more banks jump into the usage of XRP, it will begin to obtain something that has so far eluded Bitcoin and all other crypto-currencies: mainstream acceptance.
Many people will quote Warren Buffet when it comes to making sound investment decisions; in crypto, it's best to augment these words of wisdom with very active thinking. Who has the best technology? Ripple. Which crypto-currency was created by a US-based company? XRP.
Does a SWAT analysis reveal that this investment is still just as spectacular an opportunity as a year ago? More so. Just look what Ripple has done in one year.
The advancement of XRP price levels is not a straight line; even though its volume is hundreds of times larger than it was one year ago, we can use Bitcoin's price history as a road-map. And if that road-map is any indication, the price levels of XRP are going to continue to gyrate up and down quite consistently for the foreseeable future. This trend will eventually taper off and become more stable; keep in mind that you own a digital asset with tremendous utility and a sizable future value.
- https://www.fincen.gov/sites/default/files/shared/Appendix_D.pdf (page 63)
- https://coinmarketcap.com/ (snapshot at 4pm on 10-28-2017)
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