- Ripple has released another 1 billion XRP from the company’s escrow account yesterday.
- In the crypto community, resentment is growing over the falling price of XRP, which may be caused by XRP emissions by Ripple.
There was a big outcry in the crypto community yesterday, December 1st, when Whale Alert reported that Ripple had released one billion XRP, the equivalent of around $225 million, from its escrow account.
🔓 🔓 🔓 🔓 🔓 🔓 🔓 🔓 🔓 🔓 1,000,000,000 #XRP (225,092,032 USD) unlocked from escrow at Ripple Escrow wallet
— Whale Alert (@whale_alert) December 1, 2019
While this is a routine emission that Ripple makes every month, it didn’t go unnoticed in the crypto community. Ripple’s purpose is to sell XRP to strengthen the ecosystem on exchanges, banks, payment service providers and other members of RippleNet. However, the volumes of sales and the fact that XRP currently manages over 50 billion XRP in the escrow account are controversially discussed.
The increasing criticism is based on the assumption that Ripple’s sales will increase the sales pressure on the price of XRP. This argument is not surprising considering the performance of XRP since the beginning of the year. In this timeframe, XRP is one of the biggest losers in the market, recording a drop of nearly 40 percent.
Does Ripple manipulate the price of XRP?
As Grayscale Investments, the world’s largest crypto asset manager, recently stated in a report, Ripple is more centralized than other cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH). One of the reasons both Grayscale and the crypto community cite is that Ripple still has over 50 billion XRP in his escrow account.
This issue dates back to the creation of Ripple and the XRP Ledger. When David Schwartz, Jed McCaleb and Arthur Britto created the protocol in 2012, they generated 100 billion XRP. Of these, 80 billion originally went to Ripple in the form of a grant.
Each month Ripple releases exactly 1 billion XRP from the trust account for sale. The amount that Ripple does not sell is transferred back 30 days later. The process is designed to assure investors that Ripple will never flood all XRPs into the market at once. However, for many XRP investors this limitation is not enough.
As XRP’s price falls far short of Bitcoin’s performance in 2019, Ripple has been increasingly criticized for “dumping XRP” and “flooding” the market with XRP. In its last quarterly report, Ripple therefore addressed the “FUD” and contradicted the allegations of price manipulation, stressing that Ripple cannot control the price of XRP.
According to the report, Ripple sold $66.2 million of XRP in the third quarter of 2019. This represents a 73.7% decline compared to the previous quarter when XRPs worth $251.5 million were sold. In total, three billion XRP were released from the XRP escrow account in the third quarter of 2019, while 2.3 billion XRP were returned.
Will the XRP price rise due to new Ripple partners?
Despite the transparency that Ripple maintains, the question is what impact the XRP emissions will have on the spot market price. There are currently around 43.3 billion XRP in circulation. Conversely, this means that 56.7 billion XRP will still come onto the market. With regard to the law of supply and demand, there is no rosy future for the XRP price at first glance.
However, this consideration is very one-sided, as Ripple is pursuing greater goals with XRP. With the software solution On Demand Liquidity (ODL), Ripple wants to conquer the banking sector. As Brad Garlinghouse recently explained, Ripple aims to provide the banking sector with $2 billion in liquidity in the form of XRP.
If Ripple can do that, the demand for XRP could increase significantly. The impact on the price is however questionable, as $2 billion (approximately $9.1 billion XRP at a price of approximately $0.22) are facing a remaining $56.7 billion XRP in the escrow account. Therefore it remains questionable whether Ripple will ever reach its all-time high of over USD 3.40 again.
In fact the opportunity costs for XRP do not paint a positive picture at the moment. If investors had invested in Bitcoin instead of XRP, it is likely that they would have made substantial profits since the beginning of the year.
At the time of writing, XRP was around $0.22, down 1.6% over the last 24 hours and down 25.6% over the last 30 days.