XRP and LUNA: Will Crypto’s Greatest Price Collapse Repeat Itself?
The collapse of LUNA has created many questions. One major one being: Is XRP next?
Executive Summary: The ongoing legal battle that XRP is embroiled in have led many to ask whether there is a very real parallel to LUNA’s implosion. This has led to many a heated debate between crypto investors as XRP has grown to become the sixth largest cryptocurrency by marketcap. An XRP drop could tank the larger Altcoin market. We’ll look at some reasons as to why XRP may not meet the same fate Luna did.
XRP has been the subject of a ton of negative news coverage lately and many investors are understandably anxious. Crypto fans prowling the market for cryptocurrencies, know that there are now infinitely more tokens and coins than ever before. One of the more well-known cryptocurrencies on the market is XRP, the native coin of the Ripple network, which has swelled to 6th place according to coinmarketcap.
We have previously covered XRP’s ongoing drama and its impact, some crypto followers, however, have voiced additional skepticism regarding XRP's long-term viability. These naysayers are particularly focused on the possible parallel between XRP’s future and the prior failure of the LUNA cryptocurrency.
In this piece, we'll examine the reasons why the devastating outcome of the second LUNA crypto collapse is not necessarily a model for what will happen with XRP. Fear and anxiety regarding negative investment outcomes is a part of investing, especially crypto investing where the possibility of 90% losses is always omnipresent. The most powerful way to counter this fear and anxiety is through knowledge and that knowledge is gained through careful analysis of the past.
Coming to terms with and fully understanding the reasons behind the crash of LUNA crypto is of the utmost importance for all crypto investors. While we are on the subject of crashes one of the toughest experiences is losing access to your data in event of a loss of power. One way to prevent that from happening is by checking out an affordable backup battery supply.
What Is LUNA and Why Did It Crash?
The LUNA coin serves as the native cryptocurrency for the Terra network, a blockchain platform designed to facilitate stablecoin issuance and decentralized financial applications. Early in 2021, the coin experienced a massive increase in value due to the widespread adoption of stablecoins developed on the Terra network. However, in May 2021, LUNA’s value sharply fell, causing a massive sell-off that wiped out market capitalization estimated to be in the billions of dollars.
The massively overpriced LUNA cryptocurrency was in essence detached from reality as its value was based more on speculation than on the underlying fundamentals of the token itself. While the Terra network had not yet reached widespread adoption, investors expected future expansion, which led to a high demand for the LUNA coin. This expansion formed the classic bubble ready to burst. When the market's sentiment changed and investors started selling off their currency holdings, the price plummeted precipitously!
What Is XRP and How Is It Different From LUNA?
In sharp contrast to LUNA, XRP's value is driven by its mainstream adoption and well-established use cases. The Ripple network has partnered with over 300 financial institutions, including banks and payment processors, to enable cross-border payments. Unlike LUNA, XRP forms an essential part of the Ripple network ecosystem as it is currently being used as a bridge currency in its use cases. With the increase in demand for cross-border payments, the demand for XRP is likely to follow suit, resulting in the potential for further stability and long-term growth in valuation.
It should also be noted that the Ripple network has been putting a lot of effort into improving the efficiency of international transfers, which are projected to lead to a rise in the use of XRP. To facilitate cross-border payments in real time, the On-Demand Liquidity (ODL) service from Ripple, for instance, uses XRP as a bridge currency. The program is already being used by numerous financial institutions, including MoneyGram, and it's likely that more people will do so in the future.
Another way that XRP differs from the LUNA cryptocurrency is through its all too well documented regulatory compliance. Regulatory organizations were taken into consideration when designing the Ripple network, and as we can all clearly see Ripple has been working closely with those governmental bodies. Ripple has even worked with the International Association of Verified Blockchain Applications ((INATBA). Their coordination has been essential in helping to promote the use of blockchain technology while ensuring legal compliance. To further this point, the company has hired top-notch legal counsel to refute the Securities and Exchange Commission's (SEC) allegations.
On the other hand, the LUNA cryptocurrency experienced a sell-off in 2021 as a result of regulatory scrutiny. The Chinese government's crackdown on cryptocurrencies, including stablecoins, had a significant impact on the LUNA’s value as well. Because the regulatory landscape in the market for cryptocurrencies is still uncertain, compliance with regulations is expected to become crucial to their continued success. Because Ripple places such a strong emphasis on regulatory compliance, XRP is more prepared than LUNA was at the time of implosion to deal with regulatory issues.
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Can Decentralization Protect XRP From a Future LUNA Type Implosion?
Largely because of its greater degree of decentralization and security, XRP is a more dependable and secure investment than LUNA cryptocurrency. We have previously recognized it as one of the best cryptocurrencies of 2017! The nodes that verify transactions are controlled by independent third parties which greatly increases the degree to which the Ripple network is decentralized.
Additionally, the Ripple team has implemented a lot of security measures to protect against hacking and other security issues, and the network is also highly secure. In sharp contrast to this, the Terra network is inherently less decentralized, and concerns regarding its security have been raised. In February 2021, the network was the victim of a hack that cost millions of dollars. Following the incident, investors started to worry about the network's security and the Terra network's long-term viability, which only served as an additional catalyst further strengthening the sell-off.
Also, due to its scalability, XRP is a more desirable investment than LUNA coin. Because the Ripple network can efficiently and quickly handle a huge volume of transactions, cross-border payments can be done using it. The Terra network has encountered slow transaction speeds and high transaction fees as a result of scaling issues. This makes it difficult for the Terra network to compete with other blockchain platforms that are more scalable. You’re business and side hustles unlike Terra should not be prevented from scaling due to technological limitations. A great way to keep your team on the go is with phenomenal and affordable HP laptops.
What’s The Final Verdict On XRP?
In the end, XRP has a promising future because more individuals are anticipated to use it in the future. The demand for XRP will undoubtedly rise as a result of the desire for international payments and the expanding use of blockchain technology. Several analysts believe that XRP has room to rise even more in the future, even though the price of the cryptocurrency has already increased dramatically over the previous year. Things in the crypto-world change at a blazing pace make sure to stay informed of events as they happen by subscribing to our YouTube channel.
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Conclusion: As a result of its extensive usage and use cases, legal compliance, decentralization, security, scalability, and promising future, XRP probably won't experience the same crypto crash as LUNA. Although the cryptocurrency market can be unpredictable and chaotic, XRP's fundamentals and long-term potential make it a more reliable and secure investment than LUNA crypto. As a result, anyone looking to invest in cryptocurrencies should consider XRP a potential investment possibility. We look forward to reading your thoughts on this debate and other happenings in the crypto-sphere in the comments section below!
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The Ripple Liquidity Hub marks an important step towards a future defined by liquidity, where businesses must be able to move into and out of various assets quickly and easily, regardless of the number of users on the platform, trading volume, or market efficiency.