A Ripple price prediction for gains of 840% in 2018 shows just how much of an impact this cryptocurrency could have on the global financial system.
The goal of the Ripple project is to create nothing less than an "Internet of Value" – a system that allows almost any asset to be transferred over the Internet as easily and quickly as a text message, photo, or video.
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That's why Ripple (XRP) made the biggest gains of any cryptocurrency last year – bigger even than market leaders Bitcoin and Ethereum. The Ripple price soared 35,000% in 2017, from a miniscule $0.006386 to $2.25.
And the Ripple train has continued to barrel full steam ahead in 2018, as these new price predictions show…
Two major remittance companies – MoneyGram International Inc. (Nasdaq: MGI) and The Western Union Co. (NYSE: WU) – announced this year they had started testing Ripple for its potential to streamline their money transfer businesses.
The good news for investors is that the Ripple price, fueled in part by last year's monster cryptocurrency rally, went way too high way too fast. The XRP price has corrected 83% from its all-time high in January of $3.77. Today, the price of Ripple is a more reasonable $0.65.
That's a good thing for investors, since buying Ripple now will yield bigger gains as it hits targets beyond January's high.
Finder.com's current consensus Ripple price prediction for the end of 2018 is $6.13 – an 840% gain from today's XRP price.
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Other Ripple price predictions see the cryptocurrency soaring to $10 or beyond over the next few years.
But are such high expectations really justified?
To understand why a lot of cryptocurrency experts see such big price gains for Ripple, you need to know a few basics…
Ripple is the No. 3 cryptocurrency by market cap behind Bitcoin and Ethereum. Its roots go back to 2004, predating even the birth of Bitcoin in 2009. And yet, Ripple is a unique and somewhat controversial cryptocurrency.
The first point of confusion is that there is both a Ripple company (Ripple Labs) and a Ripple cryptocurrency (XRP) that trade on the exchanges.
The two are related – Ripple Labs did create XRP, launching it in its current form in 2012. But in 2015, the XRP protocol was made open source, meaning anyone can contribute to it. It functions mostly independently of the company now.
But the link between the two creates confusion for investors when Ripple Labs announces new customers or its global payments network product, xCurrent. Despite the name, xCurrent doesn't use XRP.
Muddying things further is that two other Ripple Labs products, xRapid and xVia, do use the XRP cryptocurrency.
When assessing XRP's value, investors need to keep these relationships straight. Ripple Labs has more than 100 banks using xCurrent, including several of the world's largest, such as Credit Agricole SA (OTCMKTS: CRARY), Bank of America Corp. (NYSE: BAC), and Banco Santander (NYSE ADR: SAN).
But Ripple has just a handful of customers using xRapid and xVia (although MoneyGram and Western Union are among the companies using xRapid).
The willingness of Ripple Labs to partner with traditional banks doesn't sit well with crypto advocates who believe the purpose of cryptocurrency is to cut out traditional banks and eventually leave them on the ash heap of history.
The Ripple Labs connection also has led to accusations that XRP is not decentralized in the way that, say, Bitcoin is decentralized. That's because Ripple Labs still controls the majority of the "validator" nodes that confirm the transactions on the network (the role of Bitcoin's miners).
However, Ripple Labs has successfully encouraged third-party validators to join the network, with a plan to reduce the number of Ripple-controlled validators as new third parties join.
In fact, the validators are one of the key differences between the XRP and cryptocurrencies like Bitcoin…
Ripple's xCurrent is designed to be much faster and cheaper than existing options for global cross-border payments, such as the SWIFT system (Society for Worldwide Interbank Financial Telecommunications). Transactions on xCurrent can execute in seconds (compared to days for SWIFT) and cost about 60% less.
And while xCurrent doesn't require the use of XRP, doing so makes the network more efficient, saving more money for the banks and companies that use it. That's because XRP can provide liquidity to the system – something of particular importance in foreign exchange conversions between infrequently traded pairs.
Banks that conduct a lot of international transactions hold foreign currencies in so-called "nostro" accounts. These are accounts a bank maintains with another bank in a different country, but stocked with that country's native currency. Nostro accounts make foreign exchange transactions easier by ensuring currencies are on hand when needed.
But nostro accounts tie up a lot of capital while waiting to be used, which costs the banks money. Such accounts make up 80% of the costs of international payments.
This is the problem XRP seeks to solve. One large XRP account can take the place of many nostro accounts, because XRP is instantly convertible, through the Ripple network, to any fiat currency – or, for that matter, to just about any asset you can think of.
There's $27 trillion stored in nostro accounts today. XRP need only grab a small portion of that for its price to skyrocket.
Ripple Labs still need to convince the banks that using XRP is in their best interest, but that's the beauty of xCurrent – it's the foot in the door that will enable widespread XRP adoption.
These lofty Ripple price predictions take this catalyst – and more – into account…
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