Ripple has done it again. With a 24.2 percent 24-hour increase, it surpassed
Ethereum to become the world’s second largest cryptocurrency. However, investors are concerned about Ripple’s mid-term price trajectory.
Japan leads
On May 8, Cointelegraph reported that Ripple overtook Ethereum after the
formation of a Japanese bank consortium which further triggered the attention of institutional investors and casual traders in Japan. At the time, the Japan Bank Consortium
stated:
“In order to address these emerging needs, banks have come together to launch the Japan Bank Consortium for cross-border and domestic payments which enable a flexible and efficient payment system. It is the world’s first case to implement Ripple solution in a cloud environment.”
Since then, Ripple has demonstrated a high level of volatility, mostly because its trading is concentrated in two major markets: Japan and
South Korea. According to various Bitcoin and digital market data providers including CoinMarketCap, nearly 15 percent of Ripple’s daily trades are processed in South Korea and, along with Japan, it is processing the majority of orders.
Inorganic price surge
The main issue with Ripple’s recent price trend is its inorganic growth. Nearly overnight, Ripple price and market cap surged by around 34.4 percent and this time, unlike its price surge on May 8, the sudden increase in Ripple price is unjustified.
It is abnormal for a Blockchain network and cryptocurrency with the size of Ripple to add $3 bln to its market cap without a specific cause.
More importantly, as shown in the chart shared below, Ripple’s market cap has risen from around $200 mln to $11.4 bln in a two-month period. That is a 57x growth in a period of 60 days.