Ripple’s Adoption Is On The Rise As Coinbase Adopts XRP For Cross-Border Transfers: Should Holders Be Worried About Velocity?
Ripple’s XRP Adoption Is On The Rise As Coinbase Has Adopted It For Cross-Border Transfers, Should Holders Be Worried About Velocity?
Coinbase, which is one of the largest crypto exchanges in the world and the main one in the United States, has recently decided to start offering a global remittance service. This new service will use two tokens: Ripple’s XRP and USDC.
Now, the users from the company will be able to send money to other countries for free using one of these two tokens. According to Coinbase’s official statement, there will be no fees to the project and crypto users will be able to send money to each other all over the globe.
Coinbase has affirmed that these two companies are optimized for this kind of cross-border transaction, so you can use them to send and receive money fast without having to convert it to the local fiat currency. Coinbase users will be able to use the service completely for free while people sending money to others outside of the network will have to pay normal on-chain fees.
A Controversial Move
The move was not completely uncontroversial and some people in the crypto sphere have accused Coinbase of creating “subtle advert” for Ripple’s XRP and its xRapid system. EthereumWorldNews, a crypto media outlet focused on the Ethereum network, was one of them, as the site was intrigued by the decision and so were several people in the Coinbase and XRP community.
The ones from the XRP community, however, obviously rejoiced with the decision. This was understood as something that can help Ripple to achieve major adoption now.
Coinbase is supported by many countries which are known for their money remittances like Mexico and the Philippines, so the community believes that people from these countries will start to use XRP as well, which would be great for their own personal interests and for the XRP network.
The company has not officially unveiled the service that it was using for this cross-border transfers, but many people seem to believe that xRapid may be used since it is the most common XRP-based remittance tool and it has very low costs.
Is Coinbase Bullish On XRP?
An obvious question remains: can Coinbase be bullish on XRP now. The company would not simply decide to use the token without some financial or strategic reason behind, as companies which are so big as this one simply do not make decisions without clear goals in mind.
By using XRP and maybe even xRapid, it looks like Coinbase may be very optimistic about Ripple, which was added to the exchange last month.
On social media, some people have obviously complained that other solutions were not chosen instead like the Bitcoin Lightning Network. However, others responded that they didn’t choose it because it was a buggy mess and confusion started, as usual. Some people even believed that Coinbase endorsing the XRP network could have been an April Fool’s joke, but it seems that it wasn’t.
Should XRP Holders Worry About XRP Token Velocity?
No one can deny that Ripple is currently very successful. The company faced several hurdles last year, just like almost any other crypto company in the market, but it has come out from the crisis stronger. Now, the community is expecting prices to increase.
The adoption by Coinbase, for instance, could boost prices. However, some critics are starting to believe that the XRP holders should start to be worried about something called token velocity as well.
If you never heard the term, token velocity is the rate in which a currency is actually being spent. The more money changes hands, the more velocity it has. In a conventional market, this often leads to inflation, which makes the price of goods and services go up. Basically, if you have too much market velocity, your market value is bound to drop.
These critics compare XRP and fiat currencies in this case and believe that the same thing can happen to Ripple. It XRP changes hands too quickly (which can happen because of a high adoption), it may be subject to inflation as well.
Banks would hardly be affected by this at all, so they would not care. They see XRP as a means of exchange, not really something that has storage value. Holders, on the other hand, should be considerably more concerned about this prospect, as they may see the price of their holdings dropping a lot.
If the banks continue to change XRP all the time for fiat using external counterparties, the velocity of the market is bound to go up, which could push the value of the asset down.
Emiliano Pagnotta, a financial specialist, has talked to CryptoBriefing and confirmed this theory. He believes that a high velocity would drive the price of the token down. However, he also sees this as uncharted territory, so things may not happen the same way.
Therefore, if banks use XRP all the time, it may not be a good idea to hold so much of it if you are a retail trader. Unlike Bitcoin, XRP is no storage of value. Different tokens have different properties and maybe the rise in adoption of XRP caused by Coinbase will show us that.