The asset XRP (the digital asset used by networks such as RippleNet to process cross-border payments) that builds Ripple's infrastructure is valued at about $4 billion in the secondary market. However, according to the data, Ripple’s XRP holdings are worth $70 billion, many times higher than XRP’s valuation.
The annual growth rate of each asset in 2020.
Cardano ADA: +3,290%
BinanceCoin BNB: +3,058%
KuCoinToken KCS: +2,028%
Polkadot DOT: +1,353%
Ethereum ETH: +1,171%
Uniswap UNI: +953%
Chainlink LINK: +875%
Bitcoin BTC: +728%
XRP XRP: +532%
Litecoin LTC: +406%
Bitcoin Cash BCH: +161%
Gold: +3%
USD exchange rate: -8%
Billionaire cryptocurrency investor, Galaxy Digital CEO Michael Novogratz said:
"In the secondary market, XRP is 'trading' at a market cap of $4 billion, but the total value of XRP is about $70 billion. The current price seems wrong, and if the price of XRP settles at the existing market cap, the price should Very cheap, but it's not.
Is XRP Undervalued?
The fact is not that XRP is undervalued. According to longtime cryptocurrency researcher Leonidas Hadjiloizou, the XRP locked in Ripple's balance sheet is in escrow and is likely not accounted for in Ripple's market capitalization.
As a result, these assets won’t be available until they start unlocking, which may not be valued at the value of the company’s equity.
He said:
“$62 billion in XRP on Ripple’s balance sheet is locked in escrow. At the same time, XRP is under attack by the SEC, so the market may not be taking Ripple’s XRP holdings into account as the coins are in lock-up period."
In December 2017, the Ripple team explained that XRP holdings in Ripple escrow released 1 billion XRP per month for the next 55 months.
400,000,000 XRP (226,995,603 USD) transferred from Ripple Escrow wallet to unknown wallet https://t.co/DMzYUxVBMR
— Whale Alert (@whale_alert) April 1, 2021
Here's what the team said at the time:
"Escrow consists of independent ledger escrow, releasing a total of one billion XRP per month for the next 55 months. This provides an upper limit on the amount of new XRP that can be circulated. The amount of XRP actually released into the server may be far from the issuance." More than that."
In theory, if the amount of XRP on the company's balance sheet is unlocked and the price of XRP doesn't crash, it's clear that Ripple's market cap is too low.
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XRP/USDT daily chart (KuCoin.top / Chart by TradingView)
Since April 1, the price of XRP has risen from $0.57 to a peak of $1.49, an increase of approximately 160%.
What is behind the rise in XRP?
The main catalyst for the 160% rise over the past two weeks has been Ripple's victory in legal proceedings. Ripple lawyers were granted access to the history of discussions within the SEC about cryptocurrencies, and a court denied the SEC the ability to disclose the financial records of two Ripple executives, including CEO Brad Garlinghouse.
Another reason could be the converging trade between Bitcoin (BTC) and altcoins, especially when BTC sees sideways price action and other cryptocurrencies are able to bounce back and catch up with Bitcoin’s rising footsteps.
Kelvin Koh, managing partner of Spartan Group, one of the largest DeFi-focused funds in Asia, said big quant funds are trying to trade between bitcoin and major altcoins.
Therefore, the trend of capital going into altcoins and then back into Bitcoin is cyclical.
The reason this happens on a regular basis is that there are plenty of quant funds bridging trades between BTC and small amounts of liquid assets. Whenever there is an asset that is cheap relative to BTC, it is hoarded. When the price slowly rises and converges with BTC, they will be converted into BTC again. No fundamentals are involved, so don't get too fixated on finding reasons for these liquidity. This strategy has proven to be effective over time, and with enough managers playing it, it can become self-fulfilling and keep looping.
The original text was compiled and organized by Sophie, a rich woman. The English copyright belongs to the original author. For Chinese reprint, please contact the editor.
