Ripple is a goofy business. For more than a decade now, the company has held vast quantities of magic beans known as XRP, which it dumps onto the market at regular intervals. It’s not clear why anyone needs these magic beans, but people buy them anyway, and that has made Ripple very rich—so rich that this week it casually spent $1 billion to buy a treasury management company called GTreasury. The question is how much longer Ripple can keep its magic bean factory humming.
TL;DR
- Ripple is expanding into traditional finance by acquiring GTreasury and other companies.
- XRP's utility remains unclear despite Ripple's efforts to market it as a bridge currency.
- Ripple holds significant XRP reserves, which it gradually releases to the market.
- The company aims to help businesses navigate the intersection of TradFi and crypto.
To better understand Ripple's future outlook, it's beneficial to learn more about one of the crypto sector's most established and peculiar firms. Established in 2012 under the name OpenCoin, the company subsequently developed XRP. This cryptocurrency differed from earlier ones such as Bitcoin and Litecoin. Rather than implementing a mining process for gradual token distribution, XRP's founders instantly generated the entire supply, totaling 100 billion tokens.
XRP's value has increased due to its status as an early cryptocurrency and the strong reputation of Ripple's initial blockchain technologists. However, a clear justification for XRP's purpose has never been established. While Bitcoin is recognized as digital gold and Ethereum serves as the foundation for smart contracts, XRP's most prominent characteristic has consistently been its fervent online supporters shouting “to the moon!”
Despite its efforts, Ripple hasn't been idle. Brad Garlinghouse, the company's long-serving CEO, is a compelling advocate who has dedicated over ten years to engaging the financial industry. For a period, around 2015, he successfully convinced major banks to test XRP's ledger—which is reportedly quite effective—for facilitating global money transfers. However, the banks became hesitant about relying on Ripple's infrastructure. Consequently, Garlinghouse shifted his focus to marketing XRP as a “bridge currency” capable of enabling streamline remittance transfers in secondary financial channels, with assistance from money makers. The emergence of stablecoins then necessitated a reconsideration of their strategy.
This scenario clarifies Ripple's recent strategic move: acquiring not only GTreasury but also, earlier in the year, a prime brokerage and a stablecoin platform. Collectively, these actions signify the company's message to the corporate world: “Hey, come sign up for our tools that will help you navigate the growing intersection of TradFi and crypto.”
This concept isn't without merit. However, as those involved in acquisitions can attest, while the initial plan might seem sound, realizing the anticipated synergies proves more challenging than anticipated. The key question here is whether GTreasury's leadership, accustomed to managing foreign exchange and standard corporate financial operations, will integrate smoothly into Ripple's cryptocurrency environment. Furthermore, will Ripple's management refrain from attempting to incorporate XRP into existing services where it's not strictly necessary? Fortunately, Ripple has ample opportunity to determine these outcomes.
Currently, Ripple holds approximately 40 billion XRP, valued at about $2.45, which it gradually dispenses monthly via a deliberate escrow mechanism. This approach has been successful thus far, as demand for the asset persists. However, despite the support of the XRP community, “to the moon” narratives have limitations, and Ripple must demonstrate its capacity for substantial business development.
Jeff John Roberts
[email protected]
@jeffjohnroberts
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