Ripple (XRP) Being Listed on Coinbase, Possible Insider Trading Before Listing Announcement, Whether Ripple (XRP) Is Safe for Coinbase Customers Is up for Debate

February 26, 2019 / by Zachary Mashiach

Coinbase announced today that Ripple (XRP) is going to be listed on Coinbase Pro, with Ripple (XRP) deposits being accepted as of 1 p.m. Eastern time. Soon, limit order trading will begin and then full trading.

To be clear, this does not mean Ripple (XRP) is being listed on Coinbase itself, although in general, when a cryptocurrency goes live on Coinbase Pro, it is added to Coinbase within a few weeks.

Getting added to Coinbase Pro and then eventually Coinbase will provide easy access to Ripple (XRP) in the United States since Coinbase is perhaps the most popular mainstream cryptocurrency exchange in the United States. Often cryptocurrencies rally when added to Coinbase, and this is known as the Coinbase Effect.

Insider Trading Speculation

The Coinbase Blog and Coinbase Pro twitter announced the listing at 1 pm Eastern time, which sparked an 8 percent Ripple (XRP) rally. However, Ripple (XRP) began to rally this morning just after 9 a.m. and gained 3.5 percent before the listing was even announced. This has raised some suspicion that the listing information was leaked early, giving insiders a chance to buy before the public learned about the listing.

Indeed, the rally following the Ripple (XRP) listing news lasted less than an hour and now Ripple (XRP) has declined 3 percent from the peak. This could perhaps indicate that those who bought before the listing became public have now dumped their holdings and made a quick 8 percent profit.

That being said, Ripple (XRP) could rally again when it goes live for trading on Coinbase Pro and then Coinbase.

Why Has It Taken This Long for Ripple (XRP) to Be Added to Coinbase?

Ripple is the number three cryptocurrency on CoinMarketCap with a market cap of $13.5 billion and is well ahead of number four EOS which only has a market cap of $3.2 billion. If Ripple (XRP) has such a high market cap relative to all the cryptocurrencies besides Bitcoin (BTC) and Ethereum (ETH), why has it taken so long for it to be listed on Coinbase?

First off, Ripple Labs has been in a protracted legal battle with the Securities and Exchange Commission (SEC) over whether Ripple (XRP) is a security. So far, Ripple Labs has staved off any SEC decision with a well-armed legal team. However, the SEC definition of a crypto security is a cryptocurrency that is issued by a centralized company, sold for profit, and that investors buy in expectation of profits. Ripple (XRP) meets all of these requirements.

With this listing, Coinbase is betting that Ripple (XRP) will not be declared a security, which may be a risky bet.

Further, Ripple (XRP) has a highly centralized supply. 100 billion Ripple (XRP) was initially created by Ripple Labs, and at this time, 58.7 billion Ripple (XRP) is still held by Ripple Labs. This may be overly conservative. A study alleges that 78.2 billion Ripple (XRP) is under centralized control.

This centralized supply makes the Ripple (XRP) market highly prone to price manipulation by Ripple Labs. Essentially, anyone who holds Ripple (XRP) regularly loses money due to Ripple Labs dumping Ripple (XRP). It is actually possible that Coinbase adding Ripple (XRP) will make it easier than ever before for Ripple Labs to dump Ripple (XRP). This makes it a questionable decision to offer Ripple (XRP) to Coinbase customers.

Most of all, there is still plenty of debate as to whether Ripple (XRP) is a cryptocurrency. Ripple (XRP) has no blockchain. Ripple (XRP) uses the Ripple Consensus Protocol, which is where servers validate Ripple (XRP) transactions. According to BitMEX research, most of these servers are controlled by Ripple Labs, and Ripple (XRP) transactions can be frozen due to this centralized control.

Therefore, this is the first time Coinbase has listed an asset which is not truly a cryptocurrency.

While it may be good news for Ripple (XRP) HODLers that Ripple (XRP) has been added to Coinbase, and it may cause a rally due to the Coinbase Effect, individual investors and traders should exercise caution before buying Ripple (XRP) on Coinbase. In the recent past, the Coinbase Effect has only led to short-term rallies. Some cryptocurrencies have crashed soon after listing. Since the Ripple (XRP) market is prone to centralized dumping, a price rise from the Coinbase Effect could theoretically lead to a crash later on.