Blockchain payment network Ripple launching an initial public offering (IPO) could, in fact, devalue the cryptocurrency in which it holds a majority stake.
According to several market participants interviewed by Cointelegraph over the weekend, Ripple going public has potential implications for the fate of altcoin XRP.
Ripple IPO: boom or bust for XRP?
The company’s CEO, Brad Garlinghouse, last week hinted an IPO may occur within the next year.
In the face of flagging XRP prices, the impetus behind a major fundraising event is clear for commentators, but whether it would reverse the token’s fortunes is not at all clear.
“Though Ripple is making inroads, it is yet to disrupt the global money transfer system in a major way,” regular Cointelegraph contributor and analyst Rakesh Upadhyay said. “Initially, after the IPO, the market participants might be patient but they will soon seek results. When the results don't come through, it will hurt prices.”
For Upadhyay, Ripple’s lack of progress despite its various deals with major banks and other businesses means harder times are still to come.
A telltale sign that liquidity remains problematic is Ripple’s mass selloffs of XRP. As Cointelegraph reported, these were bigger in 2019 than ever before. Even the IPO announcement failed to move XRP/USD significantly higher.
“A sharp fall in price will make it difficult for Ripple to raise money. It has been selling tokens, which shows that it is not making enough money to fund its operations. But unlike before, after the IPO, Ripple will also not be able to sell tokens without announcing beforehand. When announced, this will again hurt prices.”
XRP/USD 1-year chart. Source: Coin360
A different kind of selloff
The idea of an IPO becoming a straightjacket for Ripple was echoed by the head of Cointelegraph Markets Allen Scott.
For him, the IPO would be a litmus test for buyer appetites already under scrutiny after the XRP selloffs.
“Many see Ripple selling XRP regularly as a recurring 'IPO' already sans shareholder rights,” he said.
“So this might actually hurt Ripple — it would put into question not only its operational costs and business model of dumping on the market but more importantly, the existence of XRP.”
By contrast, for fellow contributor and ex-eToro analyst Mati Greenspan, an IPO could allow Ripple to strengthen its position vis-a-vis XRP.
“My feeling is that it would be positive. Additional funding for Ripple would mean less reason to sell off tokens,” he summarized.
Perhaps predictably, prominent XRP investors share even less of the sense of foreboding. Michael Arrington, the founder of TechCrunch and hedge fund Arrington XRP Capital, told followers to “disregard FUD” around the IPO.
“It's healthy, and awesome if/when it happens,” he tweeted on Jan. 24 in the wake of Garlinghouse’s announcement.