XRP is rather unique in the sense that the majority of XRP tokens are held by Ripple – the company that created the coin. However, Ripple sells XRP tokens to companies that use its platforms, enabling them to have liquidity for launch. This means that every time a new partner signs up and Ripple unlocks another batch of XRP – not exactly ideal for people hoping XRP will head to the moon.
Could Ripple’s success and adoption be behind XRP’s recent price slump and unwillingness to climb higher like the rest of the crypto markets? Due to basic supply/demand principles, it stands to reason that this could in fact be the barrier XRP has been stuck behind.
More Isn’t Always Better
When you boil it down, it’s actually a rather simple problem to solve. XRP hasn’t been rising at the same rate as the other cryptocurrencies, and this has got many holders worried – especially as Ripple keeps pumping out new partnerships. Let’s look at it from a different angle, there are 100 vintage 1927 Ford Model A cars in the BitStarz News garage – each car with a value of $20,000. Now, a collector suddenly finds another garage containing 100 more vintage 1927 Ford Model A – this would force the price of each car down, as there is a higher level of supply. Conversely, if a fire destroys 50 of the cars, the price will rise as there will be a lower level of supply.
Dishing Out the XRP
When Ripple signs a new partnership, a massive chunk of XRP is unlocked from escrow and sent out into the Ripple ecosystem. On March 8th, Ripple sent 13 billion XRP from its escrow wallet to a new partner, while on February 7th it sent an additional 1 billion XRP from escrow to yet another partner. That’s 14 billion XRP tokens released into the world in the space of one month. Apply this to the principles of supply/demand and you can quickly see why XRP hasn’t been rocketing up.
Will it Ever End?
If you’re an XRP holder, there is no need to worry. Market forces, trends and – most importantly – FOMO will allow XRP to break out of this issue temporarily. Should Bitcoin carries on heading upwards, people will look to diversify their portfolios and will buy up XRP – it’s a top token. However, this will be short-lived, as the inflation in value is simply due to FOMO and once the markets have topped out, there will be a huge selloff – much like we saw in January 2018.
On the plus side, once Ripple unlocks the final batch of XRP from its escrow account, all of the XRP will be out in the wild – meaning it will begin to act like a normal token at last. This could be years down the line, but when all XRP is released from escrow XRP will enjoy bumper gains – or at least that’s the idea.
XRP is Certainly Worth Watching
While XRP might suffer in the short term from Ripple’s partnership deals, they will all help in the long run. Don’t look at XRP for a quick short-term investment as you will get bitten. If you have five years or so to hold XRP, it could be well worth chucking some money that way. Remember, it’s all about balancing supply and demand evenly. The next Bitcoin halving is expected to make the price of BTC spike tremendously – and it’s an event that will reduce supply.
