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XRP has been one of the underperformers in the current crypto market cycle, remaining about 86% below the high of $3.84 reached on January 4, 2018. Notably, despite significant volatility at the moment, XRP is trading at a price similar to -XRP. where it was two years ago in October 2022. Crypto pundit known as CryptoTank (@Tank2033js) shared an explanation on X to explain why the price of XRP is not moving as some might expect. With 214,000 views, the thread received a lot of attention.
Why Is XRP Price Stalling? When will it change?
“I’m getting a lot of comments about the price of XRP and why it’s not moving,” CryptoTank began. “Let me explain again how the price of XRP is determined for people who are new to this space and those who still have trouble understanding.”
According to his analysis, the price of XRP is calculated by dividing the amount or volume created in the XRP Ledger (XRPL) by the circulating supply of XRP. However, he insists that the oft-quoted circulating value of around 56 billion XRP is misleading. “Just because 56 billion is distributed, it does not mean that all 56 billion is in the book to be used,” he said. A significant portion of XRP is held in private wallets, the main owners of which are known as “whales,” or are held in exchange, and thus do not actively participate in the daily transactions on the ledger.
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“What is important about the price is how much of this supply is active in the cash book,” he said. Estimating that about 20 percent of the circulating supply is active every day, he suggests that about 10 billion XRP are used within the ledger ecosystem. This active offer is essential for funding Automated Market Maker (AMM) pools, which facilitate transactions by pairing XRP with other tokens or currencies such as RLUSD (Ripple USD).
He explains that banks and financial institutions planning to use XRPL in residential areas will work with their own tokens or central bank digital currencies (CBDCs), combined with RLUSD and using the liquidity available in AMM pools. XRPL uses an algorithm designed to find the most efficient route to settlements, defaulting to XRP as the primary source unless another offers a better route. “This benchmark uses XRP as the default source of settlement and will only use something else if it’s better than XRP, which it probably won’t be,” he explained.
To demonstrate the magnitude of the potential value of the portfolio, CryptoTank highlighted the daily payout rates of several major financial institutions. SWIFT, a global provider of secure financial messaging services, processes approximately 5 billion transactions daily. JP Morgan Chase, one of the largest banking institutions in the United States, manages approximately $10 trillion in cash every day. Bank of America processes about $7 to $8 trillion a day, while Japan’s SBI Holdings processes about $2 trillion every day. “That’s about $25 trillion every day in the settlement of the four banks/institutions,” he pointed out.
In addition, Ripple, the company behind XRP, reportedly has more than 1,700 non-disclosure agreements (NDAs) with various banks and financial institutions, suggesting a large network of potential users of XRPL. Assuming that only 10% of the fees from these four institutions go into XRPL, he estimated the amount of money traded at around $2.5 trillion every day. To ensure smooth and trouble-free transactions—an essential requirement for banks—the capital available in AMM pools will need to be large. “These pools should be doubled to the value of 2.5 billion dollars to avoid failed transactions and conflicts between the pools. Banks cannot fail transactions,” he emphasized. This means that the total value or volume in the book would have to be about 5 trillion to properly settle the debts.
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Using these calculations, he calculates the required amount of XRP to facilitate this level of daily settlement. “To determine the price that XRP needs to avoid conflict and have pools deep enough to pay money to settle without failure between different currencies or CBDCs, you take $5 trillion and divide it by 10 billion of XRP in the pools,” he explains. This figure shows the required amount of XRP of $500. “The price of XRP will need to be $500 to facilitate daily payments,” he insists.
“This is a basic example of what will happen when these banks start using XRP on a daily basis for payments,” he adds. He acknowledged that other factors could improve the value of the ledger, such as tokenization of assets, debt, and real estate. “There are other factors such as token assets, token debt, real estate, etc., which will add value to the portfolio in the future,” he notes.
Speaking to the skeptics who doubt whether XRP can reach such high values, he says: “For anyone who says XRP will never be high, you really don’t understand what XRP is going to be used for or how it works. Sales don’t matter, market cap doesn’t matter, charts are nice to look at but they don’t matter.” He argues that the traditional metrics used to evaluate cryptocurrency value are irrelevant in the context of XRP intended for institutional residential use.
“You can’t plan how much money or depth of AMM pools it will take to handle those 1,700+ NDAs every day,” he argues. “No one knows how high that number will be. XRP has to be priced high or it won’t be efficient enough to do what it was designed to do, which is to handle large transactions quickly and cheaply.”
However, not everyone in the crypto community agrees with his assessment. A user representing chart analysts on X responded to his thread, saying: “Wrong: The chart is the only thing that matters. Buy coins based on technical analysis of the chart and you are doing much better than buying anecdotal and hoping it will pump. This is why 99% of stores fail. Sad but true.”
In response, CryptoTank defended his position, stressing the upcoming changes in the crypto space due to institutional acquisitions. “You obviously don’t know how tokens work or what’s going to happen globally in this space,” he responded. “Soon the speculation of shops will decrease due to the acceptance and use of the center. 99% of coins will expire. Big money is coming into the game and everything will change.”
At press time, XRP traded at $0.542.
The featured image was created with DALL.E, a chart from TradingView.com
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