Since the emerging crypto asset class is much like venture capital with liquidity, performing a quick market size analysis can provide insights into potential fundamental asset value.

What is Ripple (XRP)?

A quick distinction: Ripple is a company while XRP is a digital asset used on the Ripple network. Ripple (the company) is attempting to bring banks, payment providers, and other financial organizations, onto its network in order to facilitate faster settlement and lower costs of cross border payments. The means of achieving these objectives is to use a blockchain technology with unique digital asset (XRP). XRP derives fundamental value from the amount of on-network activity (bridge currency).

Questions to Consider when Investing

Is there a published whitepaper?

No… negative, although Ripple has released documents explaining XRP

Is there a detailed development road map?

Live and in use… positive

Does it use an open, public blockchain, and is the code published?

No…negative

Is there clear, logical, and fair pricing?

Yes…positive

Is it clear how much of the token has been assigned for the development team and how those tokens will be released?

Yes, a large percentage is still controlled by Ripple (despite a smart contract escrow account). This has implications for securities regulators, but also allows Ripple to finance the development of the XRP ecosystem…neutral

How strong is the reputation of the founding development team (Strong, Mediocre, Weak)?

Strong…positive

How strong is the technology’s differentiator (Strong, Mediocre, Weak)?

Strong, XRP is a top 3 crypto asset by market capitalization…positive

How competitive is the industry the asset is entering (Strong, Mediocre, Weak)?

Strong…negative

Price Target

Assuming:

The Ripple team delivers on the technology, and adoption occurs. Ripple (XRP) is able to gain a 50% share of the daily CHIPS (Clearing House Interbank Payments System) transaction volume, in the next 2 years. Using total XRP supply, not supply currently in circulation (important since a large percentage of XRP is not in circulation). A 30% discount rate is used to bring future price targets (2 years in this report) to today’s dollar values. Although 30% is significantly higher than the current risk free rate, crypto assets must be discounted significantly to account for risk.

Ripple is looking to disrupt the entire global cross-border payments industry. Although total global cross-border payments are in the many trillions of dollars, we chose to focus on a smaller figure: the average daily CHIPS transaction volume. Because XRP is the liquidity mechanism for these payments to settle faster than the current system allows, we used a 50% share of daily volume to build a price target model.

Given the assumptions (above) the 2-year Ripple (XRP) price target is given below: