Cryptos are fighting their way up

Abraham George Crypto Musings

A lot is happening in the crypto world. Ever since I started monitoring Bitcoin, this is the first time I am witnessing 10 consecutive days of higher closes. Not only that Bitcoin has roared above the 40,000 level but it may have established on the 40,000 handle. That doesn’t mean it will not get into the 30,000 handle again . However there are more factors pointing towards further strength.

While I look for market direction from Bitcoin as it constitutes the lion share of the crypto world, my specific interests are with XRP/Ripple. I further added to my holdings in the last two days. The market cap of the crypto world is now above 1.5 trio. XRP has neatly made a double bottom at .5 in the last few months and is trading at .75 which means it has risen 50% from the bottom.

When it comes to innovations it is the private sector that comes up with the ideas or create disruptive technologies. Later when the public sector finds those ideas useful, they slowly adopt them based on the merits of its usage. Same thing applies to the banking sector as well. The big banks hardly allocates much money to research and development. Most of the R&D is done at smaller finance companies or by hedge funds. Banks depending on its usage will rent it or buy it and allocate more money to their marketing and sales department.

When it comes to the development and adoption of a digital currency it looks like more than 80% of central banks are up to something. They are also very dependent on the private sector to give them cues or to partner with. Ripple is very active with many central banks around the world. Without giving anything away, Asheesh Birla, General Manager of Ripple recently confirmed that in a recent interview.

While XRP and Ripple will have many usages, one of its main function is to serve as a bridge currency between fiat and digital. The recent announcement by SBI Holdings in Japan which is also the single biggest investor in Ripple that they will use on demand liquidity (ODL) to make real time settlements in Philippines it created big interests in the financial circles.

These are the intital steps to a global adaptation of XRP at many levels. In the Japan to Philippines case alone, there is about 1.5 bio dollars being sent by workers annually to Philippines at very high costs. XRP should completely eliminate that and these transfers should become much faster, cheaper and seamless. The CEO of SBI Holdings is already making plans to make this available all across Africa.

Down the line, I expect XRP could move its way into settling derivatives. That’s almost a 55 trillion dollar market. IMF is already talking about a digital dollar and they have plans to revalue the SDR in 2022.

As of now, XRP can scale up to 65,000 transactions per second eliminating the usage of Nostro and Vostro accounts. XRP’s whole idea is to eliminate credit risk and prefunding costs. It will also be a big challenge to SWIFT which is more than a 50 year old messaging system used by most banks globally. They recently upgraded themselves but when XRP will be in full flow, It will unsettle Swift to become the real time settlement system. Swift may be forced to join hands with Ripple.

The ongoing case between Ripple and SEC is very disturbing. Though 90% of XRP business is outside the United States , the US is a big market for Ripple. Firstly Ripple is originally an American company and US is the biggest capital markets in the world. XRP is not available at more than 50 exchanges in US because of this case.

The clear usage of Ripple and XRP may not be easy for the common man to understand, it is better one educates himself or herself better to gain the necessary conviction to be invested in it.

While Ripple has scored against SEC on every point in this case , the lack of a settlement or a dismissal of the case argues that this is very political. Bigger opportunities exists during uncertainty and inefficiencies.

Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.