Why I think that XRP is overvalued and I never touch it.

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18 Dec 2023

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The first thing I would like to add is that this post is not investment advice and for informational purposes it publishes some data and details that strongs my opinion. Obviously I will be watching the comments in case I am corrected in any error. No one has to agree with me, as I insist, it is an opinion post on this occasion. Diversity (also of opinions) is the wealth of the natural world. Let's start!

Let's start with details on how Ripple works as a private company

Let me show some details on how Ripple works when it comes to handling the assets they issued themselves. Ripple is the issuer and largest holder of XRP, the token that when launched shared a name with the issuing company. Ripple tends to delete many of the reports it publishes on its website that contradict its further actions so they are not worthy of my trust.

Some content removed from its website (for skeptics):
In March 2017, Ripple announcement
https://ripple.com/insights/ripple-continues-to-bring-internet-of-value-to-life-new-features-increase-transaction-throughput-to-same-level-as-visa/
2 reports (Q3 2018 and Q1 2019), Ripple misreported the amount of XRP it returned to its escrow scheme, both times over-reporting the amount returned by 100 million XRP. Detailed info on this is shown in "An on-chain analysis of Ripple’s escrow system" By Coinmetrics (linked at the end of this post).

So the decentralization of the asset is non-existent even though there are a large number of users with a smaller stake and a few with a larger stake. This company holds the largest percentage of the tokens that are not in circulation, either because they are frozen until a later date by themselves or because they are in wallets that are used as a "sleeping treasury" waiting to be released to the market or sold privately to their customers.

Some numbers that support the centralization comments drop above

On October 1, Ripple unlocked 1 billion XRP tokens from its escrow system, but immediately re-locked 800 million XRP (80%) in new contracts that will end in 2027. The company was expected to put the remaining 200 million tokens (20%) into circulation soon, which could affect the price of the digital asset on subsequent dates. Notably, the outstanding supply of XRP considered by the CoinMarketCap index stood at 53.312 million at that dates, as reported by Finbold on September 30, prior to the unlocking of the 1 billion tokens.

Data about XRP supply

In order not to be subjective in the data, I share below supply data from two well-known sources in the sector, which are used as a reference by countless users and services.

October 3 - 2023 Supply details by Coinmarketcap

December 18 - 2023 Supply details by Coinmarketcap

December 18 - 2023 Supply details by Coingecko

Some "old" data that make me mistrust Ripple

Coin Metrics found several important discrepancies between what was publicly reported by Ripple and what was visible on the XRP ledger:

Two quarterly markets reports under-reported the number of XRP released from escrow by a total of 200 million XRP ($84 million at current prices)
The ‘escrow queue’ is implemented differently than announced, leading to a faster future release of escrowed funds compared to the announced schedule
Other party/parties, potentially associated with Ripple, have released 55 million XRP from an unknown escrow address not connected to the main Ripple escrow account

In trying to determine whether these findings were accurate or could be explained, Coin Metrics contacted Ripple through a number of different channels but did not receive a reply.

Let me drop here some personal opinion & public data

1.- With XRP you always have the risk of the dormant supply being drop out into circulation. This supply going to market (or circulation) is not predictible because the decission is not a protocol of issue by maths, is a centralized private entity decission, check this quoted content extracted from a Finbold post released on October 3rd:

"Ripple each month releases millions of tokens for sale. For December it has prepared 200 million XRP in two wallets of its own, which have been valued at approximately $130 million at a price of approximately $0.645 according to Vinicius Barbosa at Finbold. Ripple, the largest holder of the XRP token, holds about 46.10 billion XRP currently locked up in escrow and not part of the circulating supply. On Dec. 1, it launched 1 billion tokens, valued at $645 million, taking 20% of the total."

2.- CBDCs are an aberration against payment privacy and Ripple partners are that which fights Bitcoin purposes. Central banks and puppet banks are the 1st or 2nd key problem of economies around the world because they are the one who push the button on the money printer (and most of Ripple partners are banks or puppet partners of that banks).

Quote from Satoshi:
"The root problem with conventional currency is all the trust thats required to make it
work. The central bank must be trusted not to debase the currency, but the history of
fiat currencies is full of breaches of that trust. Banks must be trusted to hold our
money and transfer it electronically, but they lend it out in waves of credit bubbles
with barely a fraction in reserve. We have to trust them with our privacy, trust them
not to let identity thieves drain our accounts. Their massive overhead costs make
micropayments impossible.

A generation ago, multi-user time-sharing computer systems had a similar problem.
Before strong encryption, users had to rely on password protection to secure their
files, placing trust in the system administrator to keep their information private.
Privacy could always be overridden by the admin based on his judgment call weighing the
principle of privacy against other concerns, or at the behest of his superiors. Then
strong encryption became available to the masses, and trust was no longer required.
Data could be secured in a way that was physically impossible for others to access, no
matter for what reason, no matter how good the excuse, no matter what.
Its time we had the same thing for money. With e-currency based on cryptographic
proof, without the need to trust a third party middleman, money can be secure and
transactions effortless."

You can dig on the Bitcointalk Satoshi's profile to DYOR https://bitcointalk.org/index.php?action=profile%3Bu%3D3

3.- On the other hand, in my opinion it is not comparable to Ethereum, neither are they the same nor do they aim to be. So I will not go into comparisons with Eth or other trending cryptocurrencies/tokens.