Ripple Watches as Former Partner Switches Allegiances

It’s been more than three months since I last wrote about Ripple (CCC:XRP-USD) in July. At the time, I wondered how long it would take the cryptocurrency to hit $3.50, a price prediction made by FXStreet based on the assumption it held a key support level. 

Well, there was something to the prediction. Since my article, the price of XRP-USD has appreciated by 93% and trades for more than $1. So momentum is definitely on the coin’s side heading into 2022. 

However, the Oct. 6 announcement by MoneyGram International (NASDAQ:MGI) that it is partnering with the Stellar Development Foundation, the people behind Stellar Lumens (CCC:XLM-USD) and the Stellar blockchain network, as well as Circle, the group behind the USD Coin (CCC:USDC-USD), suggests investors ought to be at least a little concerned about the switch of allegiances. 

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Here’s why.

Ripple Has Come a Long Way

In 2021, according to Coindesk.com, XRP-USD is up 392% through Oct. 19. By comparison, Bitcoin (CCC:BTC-USD) has appreciated by just 119%. Of course, I say just in jest. I’m sure long-time holders of the coin are very happy with their returns year-to-date. 

As for XLM-USD, it’s up 192% in 2021, but it doesn’t quite match Ripple’s year with less than three months to go. Nevertheless, there’s no question Ripple’s come a long way.

Price predictions are a mug’s game at the best of times, especially when dealing with cryptocurrencies. They’re incredibly volatile financial instruments. Anyone who says they can predict the near-term direction of Ripple or Stellar Lumens or any of the others has an inflated opinion of themselves. 

But, as is the norm in this business, readers love to read about price predictions. But, unfortunately, they can be car wrecks. My July article is an excellent example of how one can get things wrong. 

“If you’re a speculative investor, I would argue that Ripple’s odds of falling by another 36% are considerably higher than its odds of rising 75% to $1. I would hold off on buying XRP for a few weeks until it and other cryptos regain their footing,” I concluded in my July 21 article.  

“As for getting to $3.50, I don’t think that’s in the cards for Ripple in 2021.”

Well, at least I was one for two on the prediction front. 

As we head into 2022, I wonder if the MoneyGram announcement foreshadows bad times ahead for holders of XRP-USD, or am I making a mountain out of a molehill?

It’s a Little of Both

The collaboration between MoneyGram, Stellar and Circle will enable quick and inexpensive cross-border remittance between U.S. dollars and USDC-USD stablecoins to millions worldwide. That’s a victory for all involved. 

Ripple was MoneyGram’s partner for processing cross-border payments using digital assets from 2019 until March 2021. It even bought a 30% interest in MGI as part of its partnership. However, once Ripple got embroiled in its battle with the SEC over selling unregistered securities, the arrangement likely became too challenging to maintain.

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Bloomberg reported on MoneyGram’s new partnership:

“The deal will give Stellar wallet holders access to physical locations to convert USD Coins to cash and vice versa, Stellar Development’s Chief Executive Officer Denelle Dixon said in an interview. That means it effectively brings the blockchain into the non-digital world. “This is huge for the Stellar network, and the wallets that are part of the Stellar network,” Bloomberg reported Dixon stated in her interview with the publisher.

As was the case with Ripple, there is speculation that Stellar Development could be interested in taking over MoneyGram, which has a current market capitalization of $642 million.

The Bottom Line for Ripple

The absence of Ripple’s partnership with MoneyGram has long since been forgotten. Instead, the more significant issue is the ongoing battle with the SEC. Until that’s resolved and cast aside, there’s no guarantee that XRP-USD won’t get a kick in the posterior by the securities regulator. 

It seems one thing that might keep XLM-USD out of the regulatory penalty box is the non-profit nature of the Stellar Development Foundation, whereas Ripple Labs is a for-profit organization. 

It might turn out that the switch is nothing more than a business decision by MoneyGram. Of course, that won’t save Ripple should it lose its case with the SEC, but at least it shouldn’t put an added burden on XRP-USD in the future. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.