Within the last 30 days, Bitcoin has gained 29 percent and the crypto markets as a whole have increased by 22.5 percent. In contrast, XRP underperformed with losses of 7 percent, while Ripple and its CTO David Schwartz continued to sell their holdings.
BTC / XRP – Relative Market Analysis
On April 1, Bitcoin saw a spectacular rally that rose its price from $ 4,100 to $ 5,000, and for the past three weeks the price has appeared to have remained stable above that level.
XRP / BTC on CoinMarketCap since the beginning of the year
Prior to BTC’s rally, during the bottom of the bear market, XRP was one of the best performing assets. From September 1, 2018 to January 1, 2019, XRP grew 6.7 percent. Over the same period, BTC lost a staggering 47.1 percent of its value.
XRP / BTC September to January on CoinMarketCap
This change in value is reflected in the dominance of XRP over BTC. During this period, XRP climbed from 5.8 to 11.5 percent market dominance and even outperformed Ethereum as the number two cryptocurrency by market capitalization in 2018.
Sep 2018 to Jan. 2019 BTC and XRP dominance on CoinMarketCap
But now that the cops have returned, the tide seems to have turned. XRP now underperforms its peers, especially BTC.
Expansion of the circulating supply puts pressure on prices
One area of concern for XRP owners is the price pressures resulting from the regular sales of XRP by Ripple and its partners.
Ripple owns around 58 billion of the 100 billion existing XRP. If you include investments from insiders such as CEO Brad Garlinghouse, co-founders Jed McCaleb and Chris Larsen and CTO David Schwartz in the calculation, the value is even higher. A more detailed analysis of these holdings can be found here.
In Ripple’s Q1 2019 report, the company recorded $ 62 million in institutional sales and $ 107 million in stock market sales for total revenue of $ 169 million, 563 million XRP at current prices. Ripple increased its XRP sales (in USD value) by 31.3 percent from the 4th quarter of 2018.
David Schwartz also contributed to these increasing sales. Schwartz started selling its XRP inventory on a regular basis in April 2017 and has continued to do so at an increasing pace to this day.
His wallet currently contains 3.16 million XRP worth $ 923,000 at current prices. As of early 2019, Schwartz has sold 2.8 million XRPs valued at around $ 810,000. Schwartz declared the transactions after re-examination by the community as “risk reduction”:
This is still the case. Still sticking to the de-risk strategy that my wife and I agreed to when we agreed to put our own money into cryptos. What helped me not to be so sad during the bull run was thinking how happy I would be if I regretted my decision, but it still hurt. 1/2
– David Schwartz (@JoelKatz) April 21, 2019
Given that Schwartz likely tied a large percentage of his wealth into Ripple stocks and XRP, it makes sense for him to diversify:
If you think about it, circumstances have put my wife and I in a position where we are taking a much greater risk than it would reasonably be possible for us to take. There is basically nothing we can do about that. All of my eggs are in one basket, but I like the basket.
– David Schwartz (@JoelKatz) April 22, 2019
Although the volume pales in comparison to the company’s sales, it nonetheless adds to the growing supply. Some within the Ripple community also raised concerns that the sales represent a lack of confidence in the pricing potential of XRP.
XRP wallet from David Schwartz
However, Ripple and its employees have been relatively transparent about the regular sale of these coins. Previously, Ripple voluntarily deposited the majority of its holdings in a smart contract-based escrow account to guarantee owners that the asset would not be disposed of. It is unclear whether other insiders are liquidating large amounts of XRP.
Relatively low liquidity and trading volume
The growing circulating supply of XRP is problematic for holders hoping for the token’s value to increase. These problems are exacerbated by the exchange metrics surrounding the crypto.
The impact of these regular sales on the price of XRP is compounded by the relatively low trading volume. XRP consistently had a lower trading volume than both Bitcoin and Ether.
With a 24-hour volume of $ 1.2 billion, the current trading volume of XRP is less than 1/12 of the BTCs and 1/5 of the ETH. Limited trading volume usually results in lower liquidity, and lower liquidity means that supply increases have an even bigger impact on the price.
While XRP has made amazing strides in the technologies it develops for banks, including Xpring and RippleNet, these could raise concerns. With these factors in mind, it is possible that other cryptos could achieve better returns.
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