While Bitcoin (BTC) has dwarfed most of the mainstream limelight in terms of the recent uptrends in the crypto market, the Altcoin XRP has also risen over the past month, breaking a multi-year downtrend to regain some previously lost momentum. For example, the price of XRP against the US dollar hovered around the $ 0.15 mark in March, only to surge to a high of around $ 0.80 in the first week of December.
Despite all of the positive developments mentioned above, the value of XRP could not exceed the psychological barrier of USD 1. Not only that, even with the news about the upcoming Flare Network Airdrop, for which a blockchain snapshot was successfully taken on December 12th, the third largest cryptocurrency by total market capitalization has not been able to make any major monetary progress and is currently at around 0.50 $.
The Flare Network, a Ripple-backed startup, began distributing Spark (FLR) tokens in a one-to-one ratio based on XRP holdings held on participating exchanges on December 12th at 12:00 PM UTC . Even Ethereum wallets like Metamask and Ledger allow their users to participate in the event. Although the credits will be settled this month, the final token distribution will take place in 2021.
Technically, the Flare Network seeks to create a two-way bridge between XRP and the Ethereum ecosystem by integrating the Ethereum virtual machine into its digital framework. As a result, it will be possible to use various advanced smart contracts in the XRP ledger.
FLR air drop indicating something big for XRP?
Lately, many new projects have popped up in the cryptosphere that offer decentralized financial solutions. Meanwhile, “old-time” digital currencies like XRP have operated in their own space from the start and have strong communities and partner networks.
Thor Chan, CEO of AAX – a cryptocurrency exchange – told Cointelegraph that the move from XRP to partnering with the Flare Network is more than just a drop of air as the move will bring smart contracting features to the XRP ledger and community , adding, “Despite last week’s downward trade, $ 0.9 is still within reach for XRP in the short to medium term, especially if sentiment over BTC remains as bullish as it has been in recent weeks. “
Reuben Merre, CEO of cold wallet solutions provider, Ngrave, believes the Spark token drop should be treated as a “buy the rumor, sell the news event”. He is confident that by this point the value of the air drop has already been factored into the value of XRP and that another disadvantage beyond the $ 0.5 level appears likely.
What is causing XRP to stagnate?
The Ripple project always looked extremely promising. Many believed that the ecosystem was exactly what the banking sector needed to revolutionize its existing, legacy transaction protocols. However, following the announcements by China and several other countries to develop their own central bank digital currencies, the need to globalize Ripple has diminished.
Mikhail Karhalev, an analyst at Currency.com – a London-based exchange for tokenized assets – told Cointelegraph that Ripple has faced increased competition over the past few years not only from Stellar and other similar independent projects. More importantly, the state governments around the globe. He added:
“The chances of winning such a race are extremely slim. In addition, the SWIFT system announced the launch of its “GPI instant service”, which allows users to send cross-border payments around the clock and in just a few seconds. “
Finally, it stands to reason that the distribution of Flare Network’s project tokens may play a negative role in relation to the value of XRP, as buying a token against the backdrop of a drop of air seems like an attempt to make additional profit. The fact that XRP’s value plummeted 8% after the snapshot suggests that some people held onto XRP to benefit from the air drop, but then sold it once the Flare Network recorded their XRP holdings.
The ongoing bull wave may not be an indication of the future of XRP
Although XRP has been performing strongly since the last week of November, it appears the main reason the altcoin has received so much market support lately is because Bitcoin has soared to an all-time high of $ 19,892. Additionally, well-known players who invest primarily in Bitcoin may have prompted newer, more casual, crypto enthusiasts to invest in other currencies.
In that regard, BTC rose 40% in November, while Ether (ETH) grew 53% and XRP grew 166%. While Bitcoin and Ether hit their highs in late November, Ripple hit them on November 24 – a 230% increase since November 1 – and then fell slightly in price. Karhalev pointed out, “The faster momentum growth was likely tied to the Flare Network airdrop, as crypto enthusiasts were desperate to buy more XRP in order to get more FLR and thereby double their benefits.”