I couldn’t help but notice the other day my local gym friend Sarah practically vibrating with excitement at this new development. “XRP! To the moon!” she shouted, with both her eyes wide and her mouth agape. Sarah—that’s athlete entrepreneur Sarah Bartholomew to you—typically waxes poetic on protein powder and PBs, not bitcoins. That's when I knew something was up. This wasn’t smart investment strategy; this was FOMO in its purest, most potent form.

Irrational Exuberance Or Calculated Risk?

The XRP surge is undeniable. Up 27% this month, hovering around $2.40. While the old saying claims that numbers don’t lie, they surely mislead and obfuscate more times than we care to count. The SEC settlement amount was announced as only $50 million, a drop in the bucket compared to their original demand of $2 billion. Most are heralding this result as a huge win. Ripple’s recent acquisition of Hidden Road, clearing $10 billion a day, further adds to this illusion of legitimacy. Are these building blocks of a fiscal financial fortress, or just soundly stacked shells on an incredibly quickly disappearing shore?

Let's be frank: the crypto market is a masterclass in behavioral economics. We, as humans, are predisposed to go with the flow. See a price going up? We convince ourselves that everyone else knows what we don’t, and set off the herd. This is herd behavior, plain and simple. Confirmation bias kicks in next. We selectively seek out information that confirms our pre-existing beliefs – XRP is the future! – while conveniently ignoring any dissenting voices.

Think about the availability heuristic. As we hear more tweets, news articles, and discussions around XRP’s moonshot of the day, we begin to raise expectations to unrealistic levels. All this wealth of knowledge can confuse the landscape and raise expectations to unrealistic levels. It’s really easy to get swept up in that tide when everyone around you is screaming “Buy! Buy! Buy!”

Dollar's Decline, XRP's Ascent?

And the weakening dollar is cannibalizing them, there’s no question about that. With inflation, investors are looking for a safe haven, diversifying their portfolios into investments seen with higher yields. XRP, buoyed by the most recent news about Ripple, fits that description to a t. But is this a sustainable driver? We’re all in this together. A rising tide lifts all boats. As Warren Buffett once so wisely warned, when the tide goes out we find out who’s been swimming naked.

The critical questions are: Is XRP's value intrinsically tied to the dollar's decline, or is it simply benefiting from a temporary flight to alternative assets? And even more importantly, what would occur when the dollar resumes its strength? Will XRP be able to hold such historic gains, or will it fall back down to earth?

Sandcastle Or Sustainable Foundation?

The SEC settlement is a positive development. It eliminates a big fog of uncertainty that’s long been over XRP. It’s important to step back and not fall into the belief that this is a sure-fire ticket to prosperity. The Ripple settlement doesn’t make XRP a perfect investment. It simply clears one hurdle.

The wave of speculation from a possible XRP ETF has only added more fuel to the flames. Let’s not jump to conclusions, speculation is just speculation after all! ETF approval is still a long way from a certainty, and even if it were to happen, it wouldn’t assure success.

  • Potential Upside: Broader adoption, increased liquidity, institutional investment.
  • Potential Downside: Regulatory hurdles, competition from other cryptocurrencies, market volatility.

Sarah, and all the rest of us who are still trapped in the XRP maelstrom, have to consider some hard truths. Are you doing that because they’ve done analysis and they understand very well what this technology is? Or instead, you’re more of the short term profit, Wall Street-type company. Are you ready to risk 100% of your capital?

I’m not advising anyone to invest in XRP or divest themselves of it. I'm telling you to think. Do your own research. Understand the risks. Don't let FOMO cloud your judgment. The emerging crypto market is a tremendous opportunity, but it is an equally terrible opportunity as well.

Remember Sarah, and the potential moonshot? She could be correct, but she could just as well be constructing an architectural sandcastle while the tide rushes in with no idea what’s about to happen. Don't be Sarah. Be informed. Be cautious. Be smart. The ocean of crypto is deep, and it can be pretty easy to get lost at sea.