Cryptocurrency markets were thrown into a frenzy this week as ripple (XRP) became the second cryptocurrency to hit the $100 billion mark. Ripple currently has a market capitalization of $139 billion. Market leader bitcoin has a market cap of over $243 billion. Market capitalization is the total number of circulating coins in supply multiplied by the uit price of a coin. Ripple has a circulating supply of 38.7 billion coins and is currently trading at $3.45.
Factors behind the rise in ripple’s price
There has been a huge increase in Ripple trades on South Korean cryptocurrency exchanges. Ripple also trades at a slight premium on South Korean exchanges, which also encourages arbitrage. While 12% may seem a small margin, cryptocurrency exchanges on average charge less than 0.5% per transaction, making arbitrage quite profitable. Arbitrage is the act of buying a product in a cheap market and selling it in a more expensive market where it is more expensive.
Why this is big news
Hitting a $100 billion market capitalization, raises the prospects that ripple could one day knock bitcoin from the number one spot. Bitcoin’s dominance in cryptocurrency markets has gradually reduced from over 60% to less than 40%.
The rise of ripple also shows that cryptocurrency markets are fast maturing. Analysts and investors prior to this, have maintained the opinion that cryptocurrencies with a large volume of coins in issue are unlikely to top market capitalization. Ripple currently has 38 billion coins in issue. Ultimately 100 billion coins will be issued.
The coin also represents the antithesis of what cryptocurrencies stand for, by being centrallized. This has led to some members of the cryptocurrency community calling the coin a psuedo cryptocurrency.
What is ripple ?
Ripple (XRP) founded in 2012, is both a cryptocurrency and a payment network. Unlike other cryptocurrencies, ripple is spear headed by a consortium of financial institutions.