False rumour sees Bitcoin rival soar in value, then plummet again

A rumour that one of Bitcoin’s main ‘altcoin’ rivals would soon be listed on the world’s best-known cryptocurrency exchange has seen its value soar – a demonstration of the wild forces driving the unpredictable world of cryptocurrency.

Earlier this week, rumours surfaced that Coinbase would be adding cryptocurrency Ripple to its exchange, alongside altcoins Bitcoin, Ethereum and Litecoin.

This rumour prompted the value of Ripple to jump from around $US2.50 per coin to $US3.80 ($3.18 to $4.85) – in other words, it increased by about 50 per cent pretty much overnight.

The huge burst in value made Ripple founder Chris Larsen one of the richest people in the world, ahead even of Facebook founder Mark Zuckerberg.

Investors were betting that a listing on Coinbase would have the same effect on Ripple that it had on Litecoin and Ethereum, both of which have seen their value increase by several thousand per cent over the last year.

The rationale is that, by making Ripple easily available to Coinbase’s more than 13 million users, demand for the altcoin would skyrocket, and so would the price.

In anticipation of a listing on Coinbase, ahead-of-the-curve crypto-speculators bought into Ripple through other less accessible exchanges, assuming their superior crypto-literacy would give them a massive headstart on the inevitable Ripple bull run.

But on Friday, Coinbase came out denying that it had any plans to add Ripple to its exchange.

Ripple founder Chris Larsen (right) and CEO Brad Garlinghouse.

"As of the date of this statement, we have made no decision to add additional assets to either GDAX or Coinbase. Any statement to the contrary is untrue and not authorized by the company,” Coinbase stated.

The value of a single Ripple coin promptly fell from $US3.80 to $US3.19 ($4.85 to $4.07).

Hold up – what’s Ripple?

Like Bitcoin, Ethereum and Litecoin, Ripple is a virtual currency that is issued by no central bank and based in no geographical location.

However, it differs from the other three in a number of ways, and is viewed by cryptocurrency purists with suspicion.

Crypto-anarchists, cypherpunks and the like love currencies like Bitcoin because they are completely outside the global financial system and, in their view, are therefore free from the risks and supposed corruption of that system.

Bitcoin has a particular allure because of its subversive origins and the anonymity of its mysterious creator, Satoshi Nakomoto.

The contempt of the financial establishment – people like JP Morgan boss Jamie Dimon – towards Bitcoin only increases its standing among devotees.

Ripple, on the other hand, has made a point of culturing relationships with big banks, and of all the major cryptocurrencies it is the one that banks are most open to using.

Ripple lists Westpac as being among its major banking clients. Photo: AAP

A number of major banks and financial institutions, including UBS, Santander, American Express, and Australia’s own Westpac are working with Ripple on international money transfers.

Armand Aguillon, a Gold Coast-based cryptocurrency investor, told The New Daily that, while he sympathises with the crypto-purist view that cryptocurrencies should be entirely decentralised, in practice an altcoin that had the backing of big banks was likely to stand the test of time.

“I don’t exactly like what the banks are doing either, but they’re not going to immediately go away,” he said. “I think fiat currency eventually will disappear, but I don’t think it’s going to happen in my lifetime.”

He said blockchain technology, which Ripple uses, made international money transfers vastly easier and quicker.

While banks themselves could build their own blockchain-based currencies for this purpose, he said it made more sense for them to allow a third party to provide the service.

He said Ripple was also investing in the remittance sector – that is, migrant workers sending money back to their families in their native countries.

Annual remittances to developing countries amounts to hundreds of billions of dollars a year. If a cryptocurrency like Ripple – or Stellar Lumens, which Mr Aguillon has also bet on – could corner this market, it would boost the value significantly, he said.

James Fernyhough
thenewdaily.com.au