DIGITAL currency XRP has increased in popularity in recent months, but it’s currently difficult to invest in.
We explain what you need to know about the cryptocurrency, how to buy it and what investors must be aware of.
As with any investment, whether it’s stocks or cryptocurrencies, keep in mind that making money is never guaranteed.
You may actually lose all the cash you put in, so don’t invest more than you can afford to lose or into something you don’t understand.
Cryptocurrencies are especially volatile, so their values can crash or rocket in the blink of an eye.
There’s also scant regulation for cryptocurrency firms, so you won’t have any protection if and when things go wrong.
5 risks of crypto investments
BELOW we round up five risks of investing in cryptocurrencies.
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
What is XRP?
XRP is a type of digital currency that can be used on the Ripple network, and it can be transferred between individuals and banks.
For example, if you need to send euros to someone who uses dollars, the Ripple network would convert this into XRP.
XRP is a coin, while Ripple is a network that allows the transfer of money.
The former has been used as a method of currency transfer through the network since its creation in 2012.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, told The Sun Ripple is “one of the more senior players” in the payments industry revolution sparked by blockchain developments.
She added: “It was designed to be used by the financial services industry for exchanges of regular fiat currencies, like the dollar, and crypto coins but it’s run into problems with the US regulator, the Securities and Exchange Commission.”
In December 2020, the Securities and Exchange Commission (SEC) filed a lawsuit against XRP’s parent company Ripple Labs Inc.
The SEC claim the sales of XRP were illegal unregistered securities trades, and the lawsuit is still ongoing.
How much is XRP worth?
The value of XRP is currently $0.5575, up by more than 6% over the past 24 hours, according to CoinMarketCap.
Its price has fluctuated a lot in the last few years though, and it rocketed to its all time high of $3.1966 in January 2018.
It then plunged in the following years to start increasing again earlier in 2021.
In mid-April, it reached its highest level so far in 2021 of $1.9378.
Ms Streeter added: “With any nascent technology there will be high risks, as the future of the payments industry is carved out and the lack of current regulation is a warning light.
“Traders should also be cautious as XRP has also been sent higher simply due to speculation over future price rises rather than an underlying use case.
“As sharp falls this week have highlighted, the crypto world is highly volatile and traders should only dabble at the fringes of their portfolio with money they are prepared to lose.”
How can I buy XRP?
If you’re keen to invest in XRP, make sure you’re aware of the risks and can afford to lose the money.
There’s no guarantee you can convert cryptoassests back into cash, as it may depend on the demand and supply in the existing market.
It’s also worth noting that fees and charges may be higher than with investment products.
If that doesn’t deter you, you may be disappointed to know that buying XRP tokens is easier said than done right now.
While the SEC lawsuit is ongoing, major exchanges such as Kraken, Coinbase and eToro have all suspended trading.
It means you can’t buy, sell or convert the cryptocurrency tokens.
Meanwhile, one of few exceptions is the Phemex Crypto Exchange, which has brought back XRP to its trading platform after a previous suspension.
We explain why the value of XRP dropped earlier this year.
You should also make sure to read up on the dangers of investing in the cryptocurrency.
Last month, Ripple surged in value by 15% over the weekend as plenty of other cryptocurrencies crashed.