What is XRP and why is the price dropping?
CRYPTOCURRENCY XRP has continued its months-long nosedive this week, hitting its lowest price since July.
The eighth biggest coin has struggled since early September, losing more than half its value as dozens of cryptocurrencies have floundered.
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Before investing in any cryptocurrency, you should be aware of all the risks involved.
Cryptocurrencies are highly volatile, which means your investments can go up or down quickly, often losing substantial value in short periods of time.
This means you should never invest anything you can't afford to lose.
Investing in cryptocurrencies or stocks and shares is not a guaranteed way to make money.
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What is XRP?
XRP is form of digital currency that can be used on the Ripple network.
It can be transferred between individuals or banks.
For example, if you need to send euros to someone who uses dollars, the Ripple network would convert this into XRP.
XRP is a coin, while Ripple is a platform that allows the transfer of money.
The founders of Ripple created XRP before Ripple existed.
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Ripple was originally founded in California in September 2012 as Newcoin, Inc. before renaming itself Opencoin, Inc. the month after.
In 2013, Opencoin Inc. was renamed Ripple Labs Inc., which was reincorporated as a Delaware corporation in 2014.
XRP has been used as a method of currency transfer through the network since 2012.
At the time of writing, one XRP coin is worth around $0.6834, according to CoinMarketCap.
This is a 10.12% drop on yesterday's value, continuing the currency's downward plunge.
That price is little above its sixth-month low of $0.6092 in mid-August last year.
The currency's all-time high of $3.29, which it hit on January 4, 2018.
It then hit $1.8392 on April 14, 2021, but has struggled since then.
One of the main differences between XRP and Bitcoin is that a set number of XRP coins have been produced, while new Bitcoin can be mined.
In total, there are around 100billion XRP coins, although not all of these are in circulation.
It’s thought up to one billion XRP coins are released each month, while Ripple owns a backlog of 55billion coins in case of market volatility.
Another difference is that Bitcoin transaction confirmations can take minutes, while XRP transactions take seconds.
5 risks of crypto investments
THE Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
Why has the price of XRP fallen?
There are a few big reasons behind XRP's nosedive over the past few months.
A regulatory crackdown in Russia, the world's third biggest crypto market, has accelerated months of pain for cryptocurrencies.
And fears of interest rate rises in America to stave off inflation have led investors to panic.
Meanwhile, China has banned financial institutions from offering crypto related transactions, and warned investors against speculative trading in them.
How risky is XRP?
Investing is always a risk but investing in cryptocurrency is an even higher risk as they are VERY volatile, so you should be prepared to lose your money.
Another risk is that there is no guarantee you can convert cryptoassests back into cash, as it may depend on the demand and supply in the existing market.
It's also worth noting that fees and charges may be higher than with investment products.
Cryptocurrency firms aren't regulated in the way that other financial firms are. This means that you won't have any protection if things go wrong.
A British soldier is accused of tying up and forcing a couple to hand over £300,000 in crypto.
And Bitcoin boy Erik Finman defied all odds to become the world's youngest crypto billionaire at just 18.
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