Eighteen months ago, Ripple was the third-largest cryptocurrency with a market capitalisation of $28 billion. Between then and now, the network's value has risen to $37 billion, while XRP has slid to sixth place on the leaderboard. This underperformance compared to the wider market is due to a combination of negative attention from regulators and a sell-off by the coin's developer, Ripple Labs.

Ripple Labs has consistently denied any involvement in the issuance of coins. Apparently, developers David Schwartz, Jed McCaleb and Arthur Britto simply donated 80 billion XRP out of simultaneously minted 100 billion XRP. According to data from crypto intelligence agency Messari, the company has generated coins worth a total of $1.2 billion over the past four years. This was not well received by the US Securities and Exchange Commission (SEC), which deemed such a move tantamount to an ICO. As a consequence, the US regulator called for the virtual currency to be reclassified as a security. To this day, the disagreement between the SEC and Ripple has yet to be resolved, and litigation between the two parties continues.

Meanwhile, Ripple continues to use its existing coins to finance its activities. Indeed, the circulating supply of XRP has risen from 40 billion to 48 billion over the past four months, while its exchange rate has declined 50% over this same period. At the same time, around 800 million XRP (~$613 million) were put into escrow and could be added to the circulating supply in the near future.

Analytics agency Santiment has also reported the prevailing XRP correction, stating that every major uptick in search activity relating to Ripple is followed by a correction in its flagship coin. According to their forecasts, the medium-term price target for XRP is $0.55-$0.60.

Beyond increases in supply, the US Federal Reserve's key interest rate hike (to be announced on 16 March) is also putting price pressure on the cryptocurrency. Fed Chairman Jerome Powell has already warned of an upcoming 0.25% increase, but a more significant rate change would mean an even sharper correction for XRP.

StormGain analytical group

(cryptocurrency trading, exchange and storage platform)