Should I Consider Investing in Ripple?
Whether or not you like cryptocurrencies , there is one fact that cannot be disputed: Cryptocurrencies have been an incredible investment and fortunes have been made in this sector.
Chasing performance is never a good strategy, but Bitcoin, the heavyweight in this sector, continues its ascent toward higher prices, and there is little to suggest that this trajectory cannot continue to fuel an advance in all cryptocurrencies.
This raises the question: Should I consider investing in this sector? If so, is Ripple (XRP) a good investment?
How Is XRP Different from Bitcoin and Ethereum?
Investing in cryptocurrencies is a tedious task with thousands of available options. I decided to focus on Ripple because I have reason to believe that a substantial move is in the making.
Aside from that specific reason, there are other distinguishing factors that set Ripple apart from its peers like Bitcoin and Ethereum. Ripple is a transaction system that offers lightning-fast, secure transactions.
Its disruptive technology has created a niche for itself. Major banks have taken notice and are coming on board to back it up, which means this cryptocurrency has a future lined up for itself.
Is Ripple a Good Investment?
One thing we know for sure is that Ripple has been a good investment. This year alone, the Ripple coin price has appreciated to the tune of 3,556.9%, and it is trading at roughly $0.2388.
Determining whether an investment is compelling can be done in a number of ways.
The traditional way involves taking an in-depth look at the investment’s fundamentals to see if there is any value stemming from its tangible assets and income/revenue streams. The Ripple market cap stands at around $9.2 billion.
The problem, however, is that Ripple coin lacks fundamental data, so determining whether it is a good investment using this method is a difficult, and perhaps impossible, task
On the other hand, there is another method called technical analysis, and it determines whether Ripple coin is compelling based on the price action and indications generated on the Ripple price chart.
It just so happens that I have spent the last two decades studying and applying method, so I feel like I am well equipped to determine whether it is a good investment using technical analysis.
The following Ripple price chart illustrates the indication I am currently watching that will determine which direction Ripple coin is heading in next.
Chart courtesy of TradingView.com
The first indication I am watching stems from the price action, which has been constructive in nature.
Constructive price action consists of two distinct waves that are responsible for creating and sustaining a bullish trend.
The wave highlighted in green is the impulse wave, and it captures the period in a bullish trend when the asset’s price stages a move higher. This wave is characterized by an abrupt and relentless move toward higher prices. This characteristic was exhibited in March of this year, when the entire move toward higher Ripple coin prices was captured in nine weeks.
The wave highlighted in purple is the consolidation wave, and it is much longer in duration than an impulse wave. The consolidation wave functions to unwind any overbought conditions that were created during the preceding impulse wave in order to set the stage for a new impulse wave to develop. This wave is characterized by its inability to stage an advance.
Once the consolidation wave is complete, the price will either break above resistance, which resides at $0.32, or fall below support, which resides at $0.13. This will determine whether the impulse wave that follows will be an advancing one or a declining one.
I have the inclination to believe that resistance will be broken and higher XRP prices will prevail. I am watching the moving average convergence/divergence (MACD) momentum indicator located in the lower panel to confirm these beliefs.
The MACD indicator uses the crossing of a signal line to determine if bullish or bearish momentum is influencing the price action. This indicator is significant because, in order to stage a move toward higher Ripple coin prices, bullish momentum is required.
The great thing about the MACD indicator is that its signal can confirm whether an impulse wave or a consolidation wave is in development.
For instance, in March, a bullish MACD cross was generated, indicating that bullish momentum was influencing the price action, which paved the way toward higher Ripple cryptocurrency prices. This indication correctly confirmed that an impulse wave was in development.
In July, a bearish MACD cross was generated, indicating that bearish momentum was now influencing the price action, confirming the notion that a consolidation wave was in development. Since that date, the Ripple cryptocurrency price has traded sideways and has refrained from staging an advance.
These examples are why the MACD indicator is such an influential and significant indicator.
Once resistance is broken and a bullish MACD cross is generated, I will have the necessary indications implying that a move toward higher prices has begun. This only leaves one more piece of the puzzle that will determine if Ripple is a good investment: an XRP price target.
Ripple Price Prediction 2018
The great thing about constructive price action is that, not only does it suggest when the Ripple cryptocurrency is set to move, it can be used to create a potential XRP price forecast.
There are two ways a price objective can be created using constructive price action, and both are predicated on the notion that the consolidation wave acts as a midpoint.
The first method is a called a measured move, and it uses the linear length of the impulse wave. That level is extrapolated from the base of the consolidation wave. The XRP price forecast using the measured move method is $0.60, which is a potential return of 87.5%.
The second method, which is called a parabolic extension, uses the log-based length of the impulse wave to establish a price object in a similar manner—except this method creates a substantially different objective. The XRP price forecast using the parabolic extension method is $9.00, which is a potential return of 2,712.5%.
Under normal circumstances, I would use the linear method. But, when it comes to cryptocurrencies, I have to go with the parabolic extension method because, when cryptocurrencies make a move toward higher prices, the moves are parabolic in nature. It has become a characteristic that is shared by every cryptocurrency I have encountered.
With a potential return like 2,712.5%, It is easy to say that, yes, Ripple is a good investment. But there is a caveat, of course.
This caveat has to do with investments characterized by parabolic moves. Parabolic moves are consistent with asset bubbles. With this in mind, once the move in Ripple is complete, a vicious sell-off will ensue, erasing much of the gains that were created in the blink of an eye. In essence, this means that Ripple is a good investment, just not a long-term one.
In order to clarify where I stand on Ripple, I have created a list of pros and cons.
Why Consider Buying Ripple?
The main reason I would look to buy Ripple is that the price chart is compelling. From a technical analyst’s point of view, tremendous gains are on the horizon.
Some may say that it’s too late to enter this sector, but I have to disagree. The largest gains are made in the blow-off phase of a bull market, and I have reason to believe that we are in the midst of that blow-off. Therefore, opportunity is everywhere.
Why Consider Not Buying Ripple?
Even though I believe that higher Ripple cryptocurrency prices are on the horizon, I also understand that once this move is complete, a vicious sell-off will follow.
Anyone caught in this sell-off may never be able to recoup their losses because there is nothing to suggest that these cryptocurrencies will survive in their current form. They have no fundamentals to base a valuation on, and the striking resemblance to the Dutch Tulip bubble is too uncanny to dismiss.
I am watching two key indications on the Ripple coin price chart that will determine whether this cryptocurrency will be a good investment. A close above $0.32 and a bullish MACD cross would imply that higher prices are in development. Based on the price action exhibited by this and other cryptocurrencies, I could justify a XRP price forecast as high as $9.00, once these conditions are met.