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Cryptocurrencies crash… But they’ll be back

Ripple (XRP) is how international banking is now being handled… but—and I’m sorry for this—before we can talk about that, we really need to get a few things out of the way about market cap

You may recall Ripple as the cryptocurrency that finally settled the long standing debate as to whether a cryptocurrency’s market cap “mattered.” XRP was uniquely suited for the task, because there are 39 billion “units” of it, whereas there will only ever be 21 million units of Bitcoin. Is the unit number itself arbitrary—absolutely, but bear with me for the moment.

The market cap doesn’t matter camp might well have concluded that due to XRP’s alleged superiority over Bitcoin, it’s price would rise to $10,000 or so, just like Bitcoin. The problem with that is that at that price, the total value of XRP would have been $390 trillion, and as that’s more money than would exist on five Earths, the idea kind of crashed. XRP is now worth about $0.78.

In truth, it was never a mainstream view that a cryptocurrencies market cap wouldn’t matter, but one sure heard the argument a lot in the comments. The idea that market cap might not matter is, to be clear, a misunderstanding of so many things on so many levels that to unpack the error would take at least a whole article in itself. It would be fun, but no, we’re moving forward.

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.