Pundit Says This Issue is Bad for XRP Price Rise

Fredo Ayala, the CFO of TREASURY, a project built atop the XRP Ledger (XRPL), has expressed concerns about the impact of XRP’s extensive supply on its price rise prospects.

Ayala made his comments on X in response to a recent discussion in the community. An initial post from pro-XRP attorney Bill Morgan had ignited this discussion. Morgan’s remarks expressed his concerns about XRP not performing as the community expected.

Despite the token surging 86% year-to-date, as it currently trades for $0.6326, most investors envisioned a much better performance. Morgan, one of these investors, invoked Metcalfe’s Law, a principle that states that the more people a network welcomes, the greater its value and utility.

Applied to cryptocurrencies, Metcalfe’s Law asserts that a network’s value and utility increase exponentially as the number of users or participants grows.

When people ask me if XRP’s price is suppressed I think of two words: Metcalfe’s law.

Given the growth of projects on the…

— bill morgan (@Belisarius2020) December 13, 2023

He wondered why XRP’s price had remained relatively stagnant despite the growth of projects on the XRPL, such as the addition of non-fungible token (NFT) functionality. Notably, the XRPL welcomed NFT functionality last October when XLS-20D went live. In addition, the network now boasts over 1,500 projects.

Ripple’s XRP Escrow Release

Morgan suggested that either Metcalfe’s Law did not apply to the XRP token and the XRP Ledger or other factors were holding back XRP’s price. Some community members asserted that this other factor is Ripple’s monthly escrow release campaign.

These individuals argued that releasing 1 billion tokens every month suppresses XRP’s price despite Ripple locking back 700 million to 800 million tokens each time. However, attorney Morgan dismissed these claims.

He pointed out that the inflation rate of XRP was similar to that of Solana, an asset that has seen a substantial price increase in the past few months. He also noted that the U.S. SEC, in its lawsuit against Ripple, argued that Ripple uses the escrow to support XRP’s price and not to suppress it.

XRP’s Extensive Supply Bad for Price Rise

Ayala disagreed with Morgan’s analysis and said that Solana’s circulating supply was much smaller than XRP’s, which made a big difference. Notably, Solana currently has a circulating supply of 427 million tokens, while XRP’s supply currently sits at a whopping 54 billion.

Sol circulating supply is only 427.6M tokens, an order of magnitude less than XRP.

While the rate of inflation maybe the same the sheer size of the supply with xrp is meant to be highly liquid.

That makes for an asset that’s bad for price appreciation. I think it’s a…

— Fredo Ayala 🏴‍☠️ 🪝 (@Fayala_brash) December 14, 2023

Ayala explained that the architects of the XRP Ledger designed XRP to be highly liquid as a gas token, leading to its large supply. However, he stressed that this large supply now poses a disadvantage for price appreciation.

He said that this was a legitimate tokenomics issue and that he expects other tokens with smaller liquidity pools, such as Evernode’s token Evers and Xahau Network’s token XAH, to outperform XRP in the bull market. He added that these assets had better tokenomics.

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