Ever since the emergence of Ripple’s XRP, there has been ongoing debate and speculation surrounding the relationship between the company’s buybacks and the impact on the cryptocurrency’s price. The community has expressed concerns about Ripple’s strategy of purchasing more XRP, instead of distributing the existing holdings. This article aims to delve into the intricacies of Ripple’s buyback strategy and its implications for market liquidity.
One of the community members, Crypto Mark, questioned the logic behind Ripple’s buybacks and suggested that the company should focus on distributing XRP rather than increasing its holdings. In response to this query, Mr. Huber, a renowned member of the community, provided a detailed explanation. He emphasized that Ripple’s transparency allows us to understand the strategic rationale behind their buyback strategy. According to Mr. Huber, if XRP holds value for Ripple, it is in their best interest to buy it on open markets for liquidity purposes.
Mr. Huber further analyzed the market and highlighted some key patterns related to Ripple’s buybacks. He pointed out that there are sudden and inexplicable price spikes of 30 to 100% in XRP, which are often followed by a gradual decline over several months. These price spikes consistently coincide with Ripple’s buybacks on open markets, which occur approximately once a quarter. Mr. Huber also noted that when Ripple purchases a net value of $100 million within 1-2 days, it triggers a price spike of around 50%.
Recent data obtained from Ripple’s API indicates a notable decrease in the company’s buyback activity. According to Mr. Huber, the API was recently updated, providing information on Ripple’s sales from December 4 to 29. During this period, Ripple sold a total of 167,758,585 XRP, with an average price of $0.62, resulting in a total amount of $104,010,323. This amount represents twice the usual sales volume observed in the past six months. Mr. Huber speculates that Ripple may seek to reduce this volume further with their next buyback.
When questioned about the scale of investment required to achieve a substantial increase in XRP’s price, Mr. Huber provided a clear response. He stated that a purchase of $100 million triggers a price swing of approximately 30-50%. To achieve a rise of 2,000%, investors would need to expect at least $4-6 billion in net purchases. This insight sheds light on the significant financial resources needed to make substantial market movements.
Mr. Huber compared Ripple’s sales and distribution strategy with that of other cryptocurrencies, specifically mentioning SOL and ETH. He concluded that the price action in XRP is primarily influenced by a lack of demand rather than Ripple’s sales. Furthermore, he highlighted the fact that over the past ten years, the supply of XRP has only increased by 22.73% more than the supply of Bitcoin, as depicted in the (XRP/XRPUSD)/(BTC/BTCUSD) chart.
Ripple’s buyback strategy has become a subject of intense discussion within the cryptocurrency community. While some critics argue that Ripple should focus on distributing XRP, others highlight the benefits of maintaining market liquidity through buybacks. The patterns observed in the market, coupled with Ripple’s transparent approach, indicate that buybacks can trigger significant price spikes. However, recent data suggests a decrease in Ripple’s buyback activity, which may have implications for market dynamics. Understanding the financial magnitude required for market movements and comparing Ripple’s strategy with other cryptocurrencies provides valuable insights into the dynamics of XRP’s price fluctuations.