Ripple currently ranks with XRP in the 3rd spot of all cryptocurrencies according to market capitalization. The US fintech company has meanwhile not only brought it to widespread recognition among small investors but above all in the banking sector. Ripple wants to revolutionize this sector with its software products in the long term. But what role does XRP play in this and how much influence does Ripple have on the XRP course? In this article, we want to take a closer look at the token distribution of all XRPs to better understand the course formation of XRP.
Relationship between ripple and XRP
In the beginning, everyone should understand that Ripple is not equal to XRP. Ripple is a Silicon Valley US fintech company specializing in financial / banking payment/funds transfer software.
XRP is an open-ledger that works independently of ripple. Ripple uses the XRP Ledger to run one of its software solutions – xRapid. XRP is used as a bridge currency to make worldwide payments within seconds and almost free of charge.
Thus, only with xRapid ripple has a direct impact on the XRP course. The other software solutions (xVia and xCurrent) do not use XRP and therefore have no direct influence on XRP course development. That’s why Ripple’s partnerships using xCurrent (currently more than 200 customers worldwide) do not play a role in the XRP course. But are still often the reason for price increases, which arise due to fake news and misunderstandings.
Distribution of XRP tokens
Since the beginning of 2019, XRP made it to the top 20 of the worst investments. Although the XRP price was relatively stable at about $ 0.30, it could hardly prevail compared to other cryptocurrencies. In the meantime, Bitcoin and many other cryptocurrencies have increased in some cases between 100% – 400%. One Altcoin (Egretia) has even gained 26,000 %. But what is the reason for the rather manageable performance of the XRP course?
The XRP Ledger does not belong to Ripple and is not controlled by the company. But the XRP tokens – a total of 100 billion in number – are largely owned by Ripple itself. All 100 billion XRP tokens were created beforehand (Minting). 80% went to Ripple Labs (giveaway) and 20% to XRP Ledger developer Chris Larsen with 9.5 billion, Jed McCaleb with another 9.5 billion and finally Arthur Britto with 1 billion XRP.
Ripple’s XRP is deposited in an escrow account and can only be sold monthly to a certain extent. The three developers also have specific requirements regarding the sale of their XRP tokens. This is to prevent too many XRPs from being suddenly sold on the market and making the XRP course take a deep dive.
Ripple’s XRP sales increase number of XRP’s in the market
Nevertheless, these players – with ripple at the top – play a crucial role in course development. The constant sale of XRP tokens to investors will increase the number of tokens issued each month. This artificially increases the market capitalization (number * price per token) and pushes the XRP course down.
According to CoinMarketCap, you can get an accurate picture of how many XRPs were in circulation and how many were added each year.
Over the last 6 years, the number of XRP tokens has increased from 7.8 billion to 42.57 billion. Ripple publishes a quarterly report detailing exactly how much money was actually spent on the monthly sale of the XRP.
Ripple has generated more than $ 700 million in XRP sales since 2016
In Q4 2016, the first report was published by Ripple Labs. At that time only 4.7 million XRP (ripple) were sold. The XRP course at that time was less than a cent. In 2017, Ripple raised a total of $ 160.8 million through the sale of its XRP.
Turnover shot up in 2018, reaching $ 533.6 million. It should not be forgotten that in 2018 the XRP price reached its previous all-time high of $ 3.83, helping Ripple to earn more.
Nevertheless, 2018 was also one of the worst bear markets, where many cryptocurrencies have lost more than 90% of their value. Whether the Escrow sales of ripple have led to additional pressure on the price can not be answered clearly.
But the mere fact that Ripple circulated over 2 billion XRPs in 2018 (5% of total current assets) gives us some insight. Since the beginning of 2019, Ripple has launched another 1.77 billion XRP and further increased its XRP working capital.
XRP course can come under more pressure in the long term
Although these regular sales can not influence the XRP price directly because they are mostly over-the-counter (OTC), outside of the known stock exchanges it could look different in the long run. In the long run, Ripple’s sales increase the number of XRP tokens in the market, putting increasing pressure on the XRP’s price. The demand for XRP must therefore also grow steadily to make up for the increased supply.
But it could get worse. Theoretically, Ripple is allowed to sell about 1 billion XRP per month. In reality, Ripple sells much less and the unsold XRPs ready for the month flow back into the escrow and are blocked for a period of time.
Whether this is due to the insufficient demand on the part of the big investors or whether Ripple currently just does not want to throw too much on the market remains unclear at this point. The maximum is about 12 billion XRP per year. That would increase the number by more than 25% and certainly have an impact on the XRP course.
Ripple and the centralized XRP distribution
According to CoinMarketCap ripple currently holds 57.42 billion XRP. A recent research report by Messari shows that even more XRP could be out of the market, meaning they are not really in circulation.
These are the remaining $ 6.7 billion of Jed McCaleb’s XRP, $ 5.9 billion of Chris Larsen’s XRP, $ 2.5 billion of RippleWorks and another $ 4.2 billion sold by XRP II and may be subject to sales restrictions. So altogether 19.2 billion XRP, which theoretically are added to the 57.42 billion.
Ripple is a prime example of how centralized the distribution of tokens can be. There are hardly any crypto companies that hold such a high percentage of tokens. Price development could also be due to the fact that Ripple XRP and the developers continue to launch XRP on a monthly basis.
Ripple (XRP) has lost 88% of its value since early 2018 compared to Bitcoin (BTC) and there is no end in sight for the time being. The tokens continue to be sold monthly, regardless of where the XRP price is. Without positive news from the xRapid front, this could put even more pressure on the XRP and drag it down.
At this point, it is important to understand that an XRP price increase makes ripple itself rich but not the small investors. That could also explain Ripple’s rather aggressive marketing and the constant fake news of the XRP Army, from which Ripple is not explicitly distancing itself from. One thing is for sure, regardless of how the XRP course is developing, the clear winner is and remains Ripple itself.
We would like to make clear once again that this is not advertising or FUD against Ripple, but a good example of how prices in the crypto market are composed and what should be considered when investing in cryptocurrencies. We want to enlighten and motivate you to conduct deeper research!