Ripple News Update
Many readers panicked when checking Ripple prices this morning because a popular web site excluded Korean exchanges from its calculation of Ripple prices.
The result was a seemingly sharp drop in XRP’s value.
What’s shocking is that CoinMarketCap did not warn investors about the change, nor did it explain the shift thereafter. Investors simply discovered the move by checking CoinMarketCap.com. This sparked panic and then a frantic search for answers.
Those searching online found what I’ve already described—CoinMarketCap.com skipped Korean exchanges when calculating Ripple prices. Everyone knows that. However, no one knows why CoinMarketCap decided to do that.
We have our theories, though.
I believe it’s the excessive bullishness of Korean traders. They love XRP. In fact, they love XRP so much that the price of XRP on Bithumb (a Korean exchange) is more than 51% higher than on Binance (the second-biggest XRP exchange).
CoinMarketCap realized that this premium distorts the average XRP price and, as a result, removed Korean exchanges from the mix.
Ripple Price Chart
Technically, it shouldn’t have mattered.
When you buy XRP on a certain exchange, you are trading with others on that exchange. You’re all drinking from the same pool. Price discovery works well.
Any difference between exchanges—to balance out those arbitrage opportunities—should be settled by institutional investors. They have the muscle to swoop in, buying on “low” exchanges and selling on “high” exchanges. They do this over and over until prices become virtually identical across all geographies.
Just look at how this works for stocks that are cross-listed on U.S. and Canadian exchanges. It is seamless.
But the crypto market is younger and much less efficient. It is dominated by retail investors that have neither the size nor the sophistication to execute these arbitrage opportunities.
That’s why you have Korean traders distorting XRP prices. And that distortion is why CoinMarketCap decided to change its calculation.
Given that Korean exchanges are facing heightened scrutiny from their own government, this move strikes me as fairly reasonable. If someone in the U.S. or Canada—or, indeed, anywhere but Korea—cannot get a fair understanding of XRP prices by looking at CoinMarketCap, then what is the point of the web site?
Right now, XRP is in freefall because investors are panicked, but consider it a sale. Once the context is understood, we expect Ripple prices to balance out. As such, we see no reason to change our $10.00 Ripple price prediction for 2018.