Why XRP (Ripple) Plummeted This Week

The crypto token XRP (CRYPTO: XRP) fell this week, dropping 21.2% from last Friday's close. The move down comes as the S&P 500 lost 0.2% and the Nasdaq-100 gained 0.1% in the week's trading.

XRP wasn't alone. Much of the crypto market dropped this week, including market leader Bitcoin.

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A glitch in the network

XRP had problems after technical issues caused the token's underlying blockchain to go offline for a few hours and stopped the usual flow of network "validation" -- an essential part of a crypto's security and function. The network was back online and functioning after a manual intervention.

The outage spooked investors and drew criticism from those who question XRP's reliability and security. It's far from the only crypto to have experienced an outage, but given XRP's quest for widespread adoption by major financial institutions, outages are not a good look.

Tariffs didn't help

XRP's misstep happened at a time when investors across the market were cautious, pulling back from "risk on" assets like crypto. President Trump introduced tariffs on goods from Canada, Mexico, and China early in the week, and announced today that more could follow next week. Though most of the original tariffs are now paused and some leaders look ready to make deals in an effort to avoid escalating the situation, the market reacted with trepidation.

What's next for XRP

The token has seen its value skyrocket this year. Investors appear to believe it can deliver on its basic premise: To remake the banking industry by enabling cheap, fast payments between institutions and across borders. While there is a lot to like about XRP, I remain concerned that its valuation -- it currently has a market capitalization of $136.3 billion -- is divorced from the value it can actually capture. If crypto investing is your aim, I would look to Bitcoin as a sounder play.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and XRP. The Motley Fool has a disclosure policy.