I have noticed an uptick in critical analysis of the valuations of XRP during its recent ascent above $1, which is par for the course after a 10x move for one of the top tier crypto assets. While I certainly think that speculation and expectations may be over-extended, I believe many critics that I have seen are viewing what is happening from the wrong angle.

The main arguments I have seen so far cite the following points:



1. Lack of meaningful transaction volume on the XRP network itself (IE speculation > utility)

2. Personal accounts of employees at FI’s who dismiss the idea of their firm

using XRP. Most commonly due to —

a) IT overheads/banks resist innovating and focus solely on their bottom-line.

b) Aversion to relinquishing asset value control to outside entities.

c) Anecdotal testaments from several alleged employees at FI’s that are

running XRP trials and see “little to no value.”

Acknowledging contrary points to any belief is almost always a valuable exercise to partake in, especially when considering financial investments.

While I believe that some of the comments made are likely genuine and

have merit, thus far the only statements I have seen from ‘FI insiders’ have been from word of mouth, with far too small a sample size to give much weight to as of yet.

To that end, the recent commentary on XRP is somewhat reminiscent of the chicken and egg arguments against Bitcoin that were pervasive several years ago.



“But what can you actually BUY with it?”

“Who/What accepts Bitcoin (that isn't a drug dealer)?”

“Most value is not from transactions/utility, but from speculation.”

“Good luck selling it to the greater fool when there is a rush to the exit.”

And so on.

What were these critics missing? Well, aside from the simple supply/demand aspect, I would argue that most were looking at Bitcoin from an “as is now, so too will always be” mentality.

I think the same mistake is taking place with many of today’s XRP critics. Something that I have come to recognize as I have aged is that change is often hard to quantify or measure in the moment, and is most often only seen to its full extent in hindsight.

What follows is my general thesis for the drivers of XRP’s growth.

1. Unit Bias — “It’s cheap!” While that statement is relative, per unit every easily accessible and liquid crypto asset is >$100. By that fact alone, XRP being a top 5 crypto asset that has existed since 2012, it’s per unit cost around $1 looks like a steal in comparison.

2. General ‘Blockchain’ Frenzy — The market as a whole is on fire, so much so that stocks with any relation to crypto assets (even if only in name) are seeing massive speculative spill over. Personally, I believe we are still relatively early on in the longer term growth trend of this newly born asset class. As noted by Henry Blodget, crypto assets really are the perfect medium for speculative bubbles.

3. Accessibility — XRP is becoming easier to access and store on a consistent basis. It is currently traded on most high volume crypto exchanges and rumors abound that it is a top contender to be added to Coinbase in 2018. Additionally, crypto as a whole is much easier to access globally than stocks are. A factor that leads me to believe they crypto ‘bubble’ overall is likely to dwarf the dot com bubble.

4. Cheap, Fast & Scalable — XRP is a clear leader at present in terms of speed, throughput, and low transaction fees relative to the other dominant crypto projects. This alone sets it near the top of the list for enterprise’s or institutions that may be considering outsourcing a DLT deployment for their needs.

5. Public Image — Bitcoin and most of the crypto market is viewed as being built to render our incumbent financial overlords obsolete. At its core, the idea is that inflation is a hidden means of taxation, and the unchecked growth of the fiat monetary supply is a cancer to a prosperous and egalitarian society. The goal of Bitcoin at inception was (and still is) to be sound money. See: Austrian economics for more context.

While I agree that there is much merit to this vision (and was personally drawn to Bitcoin because of it), it is not exactly conducive with eliciting a warm and accepting affect from the banks and/or regulators that are potentially facing their own demise.

Ripple has taken an alternate approach from most crypto and, for better or worse, is widely regarded positively from a regulatory and incumbent standpoint. Most recently this notion can be observed in the market reaction to South Korea’s potential regulatory crack-down news that sent Bitcoin sliding as rumors swirled on 12/28/2018. The XRP market at that same time continued to set new highs. A fact that I find particularly interesting seeing as South Korea commands the highest average trade volume for XRP.

Additionally, Ripple Labs being a company is well positioned to bankroll extensive media and social outreach. Something we have been seeing a lot more of from Ripple in the recent months.

6. Governance — A highly contentious issue in the crypto-verse. If Bitcoin has taught us anything in its 9 years of existence, its that decentralized systems are hard to govern.

For better or worse, Ripple has yet to see anything near as contentious as Bitcoin or Ethereum’s fork and scaling drama. For new entrants to the market who may not share the same ideologies that early adopters did, less drama is likely a selling point.

7. Hybridization — The old (company backed stocks) meets the new (blockchain/digital scarcity). This is what I believe leads legacy investors to feel more comfortable holding XRP relative to other crypto assets. The fact that Ripple Labs exists gives a sense of familiarity to older and more risk averse investors who may be looking to partake in this market and avoid being left out of “the wave of the future”.

8. Network Effects — Networks tend to gravitate towards binary outcomes as they age. They either grow toward peak penetration, or they die.

For those of you that were around during the first mega-bubble for Bitcoin in 2013, you may remember what happened after the bubble ‘popped’ in early 2014. While the price hype diminished, business experimentation, acceptance and developer interest all flourished.

We saw Dell, Microsoft, Overstock, Expedia and many others grow the underlying utility value of the crypto market simply by interacting with it. A similar wave will likely follow the 2017–2018 hype cycle. Ripple is likely to continue to compound its growth (or die) on the back of the same network effects that propelled Bitcoin in the early days.

9. Finite Supply + Escrow — While the total supply of XRP is much higher than Bitcoin’s (100 billion vs 21 million) the total supply is capped and a nominal amount of XRP are burned each day through transactions and new wallet creations on the network. Put simply, the same basic supply/demand principles apply to XRP as they do Bitcoin and any other limited resource.

Additionally the recent escrow of 55 Billion XRP held by Ripple has served to appease concerns of the possibility of Ripple Labs insiders offloading large sums of XRP onto the open market. Essentially what this move equates to is a signal that the team is in this to see their vision realized long-term, and not just for the realization of short-term profits.

10. Psychology — Greed compounds when combined with incentives. Any Bitcoin holder has incentive to see the network grow, as do holders of XRP or any other crypto asset. If enough legacy money and FI’s start to see a trend and begin to hop on the bandwagon (institutional FOMO) then this cycle becomes self fulfilling. After all, at the end of the day, most things in life that humans assign value to are in large part subjective.

11. Nascent Market — While the crypto asset market growth in 2017 has been astounding, it is still barely a blip on the radar when compared to the entirety of the global monetary value supply. Given that our lives are relatively short in the broader scope of human history, it’s understandable that many alive today view the USD (and to greater extent, government issued fiat) as the be-all end-all in terms of what society deems as a unit for measuring value exchange.

I would implore you to dust off a few history books for a broader understanding of just how in flux the history of what humans deem to be measurements of value really is.

From my perspective, all of the points listed above provide Ripple’s XRP with a Goldilocks effect of sorts for the mainstream. I’m sure there are many other more nuanced contributing factors at play that I have not mentioned here.

Caveats* —

There are MANY ways that XRP could fail and return to being valued in the fractions of a penny. You should actively seek out opposing views and keep them in your mind at all times. Reddit and XRPChat are valuable resources for discussion on these types of topics. Here is a link to get you started — https://www.reddit.com/r/Ripple/comments/7m7md6/what_are_ripples_issues/ Eventually this current bull market cycle in crypto will come to an end. Invest conservatively and try to avoid FOMO or reckless decisions in this volatile and highly speculative market. I am inclined to think that when the dust settles years from now, this will have played out very similarly to the 2000 era dot com speculative hype cycle (albeit larger in value and faster in pace).

Best of luck!

** I am not a financial professional and this is not intended to be financial advice. As with any investment, DYODD and question everything you read/hear, no matter the source.