Dec 30, 2020

How To Make Sense Of The XRP Dip?

One week ago XRP has been the world's third largest cryptocurrency. Now it is worth 3 times less than on December 22nd and is being delisted by major exchanges. What happened and why is it important?

The SEC sued XRP's issuer, Ripple, on December 22nd alleging XRP is not a cryptocurrency but an unlicensed security. The suit highlighted the fact XRP is fundamentally different from Bitcoin or Ethereum.

Bitcoin and Ethereum are decentralized and mined, while XRP is controlled and issued by Ripple. While this makes XRP more efficient in processing transactions, this advantage did not really amount to much - the SEC suit alleges Ripple had to pay banks to use XRP. And the risks of being centralized are now borne by everyone invloved.

XRP is far from the only cryptocurrency suffering from centralization risk. Among the biggest ones, Tether and Polkadot are also tied to their issuers' fate, for better or for worse. Before investing in altcoins it makes sense to check if you are looking at a real decentralized cryptocurrency or is your altcoin of choice more company- than community-based.