Disclaimer to please not take this as investment advice.
Little Intro to Ripple
Ripple has been really successful over the years with widespread adoption of its technology. I personally think they are a good example of how cryptocurrency is here to revolutionize the world (at least the payment industry).
You can read more about it here: https://ripple.com/
Ripple basically provides a better way of doing cross-border payments than SWIFT. In the backend, this runs on the XRP Ledger. You could read up on this at: https://xrpl.org/
Why I think XRP’s price will not rise
1. Ripple injects XRP every month
Ok to the point of this post. Ripple have minted all the XRPs possible at the start of the project so the supply is limited. Now, you would think that given that the supply is limited, may be the price will keep on rising? But if that was the case it should already continued to rise. Why is that?
Turns out, that Ripple holds a big chunk of the total XRPs.
As of May 15th, 2022, this is how the total XRP is distributed:
Total XRP held by Ripple: 5,591,730,904
Total XRP distributed: 48,697,761,612
Total XRP held in Escrow account: 45,700,000,013
source – https://originstamp.com/blog/xrp-how-many-are-there-and-how-many-are-left/#:~:text=As%20of%20May%2015th%2C%202022,XRP%20held%20by%20Ripple%3A%205%2C591%2C730%2C904
They usually distribute XRP every month to increase the supply. And this makes sense for their business and they want liquidity.
2. There are fees associated with XRP Ledger
Now the other point to realise is that running transactions on the XRP Ledger involves fees. How to know which fees are associated to XRP ledger? Check this out to start: https://xrpl.org/fees.html
As you can see, there are transaction costs, transfer costs and outside the ledger costs (we can ignore that because I guess it depends on the application running on top of XRP Ledger).
The fees are all in XRP. What I understand from this is that if XRP’s price rises, this means that the price of transactions are also rising. If I were Ripple, I wouldn’t want that price to be high.
And let’s say that the price increases to 5$ like many websites are predicting at the time of writing. That would mean that now my transactions are costing me 20 times more than the current amount. As a customer of XRP would I want that? What I will likely have to do is increase my “outside the ledger” costs to consumers which is then going to make Ripple as a whole less competitive.
3. Is the total amount XRP really fixed?
Well it is said that 100 billion XRP limit has been hardcoded. However, I can’t think about how Ripple couldn’t just fork another version of XRP, create another Ledger, new validators and start a new whole thing when they reach a limit.
But I might be wrong here because I am not an “expert” in cryptocurrency, blockchain or investment. So I would welcome every reader to comment here on why they think I am wrong.