Ripple (XRP) just rocketed 22% higher: Should you buy the alt coin?

Should you buy Ripple (XRP) after it rocketed 22% higher?

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Much to the relief of many long-suffering traders, the crypto market bounced back to life overnight.

While Bitcoin (BTC) and Ethereum (ETH) made solid gains of 1.1% and 6.7%, respectively, over the last 24 hours, the Ripple (XRP) price was the star performer with an incredible 22% gain to 33.3 U.S. cents.

Why is the Ripple price on fire today?

Traders have been fighting to get hold of the XRP cryptocurrency since an executive of the blockchain start-up behind the coin revealed a new development.

The executive told CNBC that Ripple Labs could launch a commercial application of its cryptocurrency-focused product as soon as next month.

The product in question is Ripple Lab's xRapid cross-border payment solution. According to the company, xRapid has been designed for payment providers and other financial institutions wanting to minimise liquidity costs while improving their customer experience.

Because payments into emerging markets often require pre-funded local currency accounts around the world, liquidity costs are high. The xRapid product can dramatically lower the capital requirements for liquidity. The image below demonstrates how the xRapid system works.

Source: Ripple Labs

Should you buy XRP?

Unsurprisingly the company's technology has caught the eye of many financial institutions previously and deals have already been signed with the likes of Santander and American Express.

I expect the xRapid solution to be no different, which could be a major positive for XRP. As the cryptocurrency is integral to the system, many traders expect demand for the limited supply of XRP could grow strongly and push up prices if xRapid takes off.

But I wouldn't be in a rush to invest in the alt coin just yet. As we have seen many times before, hype can send prices skyrocketing, only for prices to come tumbling back down when the euphoria dies off.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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