The price of online cryptocurrency Ripple (XRP) has exploded over 1,100% since December 2017, making millionaires and billionaires throughout the world, and outpacing both Bitcoin (BTC) and Ethereum (ETH).

What is Ripple?

Ripple claims to be the most advanced form of blockchain on the cryptocurrency market. Blockchain is the technology which allows online payments to be verified without the use of ‘middlemen’ like a bank or clearing house.

For example, if you sent money from your Commonwealth Bank of Australia (ASX: CBA) account to National Australia Bank Ltd. (ASX: NAB) the payment is verified by the banks and other systems.

For international payments, the standard is SWIFT. If you are in business or you have had to transfer Australian Dollars to Euro, US Dollars or Rupee, for example, you’ll know that the system is slow, tedious and expensive.

Ripple claims to be the best alternative to SWIFT. It claims to offer instant, cost-effective payments.

Owners of the Ripple currency say that it has significant benefits compared to traditional currency transfers and payment systems. And one of the biggest reasons behind Ripple’s explosion onto the cryptocurrency circuit is the growing membership of major banks.

Its “members” include Westpac Banking Corp (ASX: WBC), Royal Bank of Canada (TSE: RY), American Express Company (NYSE: AXP), Standard Chartered PLC (LON: STAN) and more.

Ripple Billionaires

The meteoric rise of Ripple has vaulted the wealth of some of Ripple’s earliest investors and its Co-Founder, Chris Larsen, into the stratosphere. According to Forbes, Mr Larsen’s Ripple tokens were worth more than $75 billion for a fleeting moment. That made him as rich as Facebook Inc’s (NASDAQ: FB) Mark Zuckerberg, who is the 5th richest person alive.

I’m not making this up.

Over the past year, the Ripple price has risen more than 30,000%. That turns $1,000 into $300,000.

The entire market for Ripple is worth around $130 billion, second only to Bitcoin at $275 billion and ahead of Ethereum’s $114 billion. In addition to his ownership of tokens, Mr Larsen has a 17% stake in the related company which hopes to facilitate transactions on the network, according to Gizmodo.

That’s nice for him.

Speculative Euphoria

It’s safe to say that the market for crypto trading, especially Ripple, is pretty hot right now.

I’ve received many questions about Ripple over the past six months, and although the intended use of the network is payments, none of the questions I received was from people trying to send or receive payments on the network.

Another thing most people seem to ignore is that the banks don’t need to make payments on the Ripple network. In fact, most buying of Ripple is completed by small ‘investors’, according to The New York Times.

“I’m not aware of banks using or planning to use the XRP token at the scale of tens of billions of dollars necessary to support XRP’s valuation,” Ari Paul of BlockTower Capital was quoted as saying.

Maybe that’s why not everyone is convinced.

Japan, the dotcom boom and bust, GFC… the boomtime list goes on.

Heck, you can go back to Holland in the 1600’s for an example of wild speculative euphoria. At the time, some tulip bulbs were selling for between 10 and 14 times the average yearly wage.

Why?

They were a status symbol.

But that was then, and this is now.

We would never do something that nuts in the 21st century.

Right?