Ripple, a company that builds infrastructure around XRP – a digital asset used by networks like RippleNet to process cross-border payments – is said to be trading in the secondary market for between $ 2 billion and $ 3 billion.
However, Ripple is reported to own $ 70 billion in XRP, which is several times higher than the company’s equity estimate.
Michael Novogratz, billionaire cryptocurrency investor and CEO of Galaxy Digital, said:
Ripple shares are traded on the secondary market at an estimated $ 2-3 billion. XRP has a value of roughly $ 70 billion on the balance sheet. The price appears to be wrong. If the XRP price speaks of an imminent settlement, the stock is very cheap. Otherwise, the symbol looks quite expensive. mind? ”
So XRP is undervalued? Not right
According to Leonidas Haciloizu, a longtime cryptocurrency researcher, a locked XRP on Ripple’s balance sheet may not be valued at Ripple’s capital level.
Consequently, these holdings will not be available until you open the lock, which may not be counted in the company’s cost of capital.
Well, Ripple’s 62 billion XRP has been booked. Meanwhile, it’s the sales of the Ripple XRP that have come under attack from the SEC, so the market may not appreciate the Ripple XRP’s assets because they are in limbo. At once.
In December 2017, the Ripple Team explained that Ripple’s Checkpoint XRP holdings would open at 1 billion XRP per month for 55 consecutive months.
Then the team said:
“The cluster consists of independent accountants who issue a total of 1 billion XRP per month over the next 55 months. This provides an upper limit to the number of new XRPs that can be launched into circulation. The turnover is likely to be much less than that.”
In theory, the cost of Ripple’s capital would be considered undervalued if the amount of XRP was opened up in the company’s balance sheet and the price of XRP did not decrease.
The problem of mismatch between Ripple’s capital value and the size of the XRP portfolio began to arise when the price of XRP began to rise above $ 1, despite ongoing litigation with the US Securities and Exchange Commission.
1-day XRP / USD price chart (Bitstamp). Source: TradingView.com
Since April 1, XRP has increased from $ 0.57 to $ 1.49, or about 160%.
What is behind the high XRP?
Over the past two weeks, the company’s victories in litigation have been the main catalyst for growth of 160%. Ripple’s attorneys were granted access to the internal history of SEC discussions regarding cryptocurrencies, and the court denied the Securities and Exchange Commission (SEC) of being able to disclose the accounts of two Ripple executives, including CEO Brad Garlinghouse.
Another reason could be the convergence of trading between Bitcoin (BTC) and altcoins, especially since BTC sees prices sideways so that the alternative cryptocurrencies can pick them up and start to work.
Kelvin Coe, managing partner at Spartan Group, one of the largest DeFi-focused funds in Asia, said large quantitative funds are trying to converge trade between bitcoin and large altcoins.
As such, the trend of capital shifting to altcoins and back into bitcoins occurs regularly. Coe wrote:
“The reason this happens on a regular basis is that there are many quantitative funds that play converging trading between BTC US dollars and many floating alternatives. When things look cheap compared to BTC dollars, they pile up. When they look expensive, they go back to $ BTC. There are no prerequisites, so don’t try to justify the moves too hard. This strategy has proven effective over time, and there are enough leaders playing it to make it self-fulfilling and keep repeating.