- This article examines how Ripple’s growth correlates with the price of XRP and how the two are symbiotically linked.
The market typically links price increases in XRP to positive news about Ripple. At least that’s what the majority in the crypto community thinks, and many even confuse the two as a single entity.
Distinction Between Ripple and XRP
First off, XRP is a digital asset that serves as the native token of the XRP Ledger (XRPL), an open-source blockchain. The platform features a decentralized design, scaled for cost-efficient, near-real-time cross-border payments. It burns XRP as transaction fees and for bridging currencies.
Ripple is the company responsible for creating the XRPL. It started as OpenCoin in 2012 and eventually rebranded as Ripple Labs, Inc. in 2013.
The institution has set up its headquarters in San Francisco, California. The Ripple Payments platform operates in over 90 payout markets, covering more than 90% of the daily FX market, and processes over $70 billion in transaction volume.
How Ripple is Heavily Tied to XRP
Ripple created XRPL, but the latter technically operates independently from the former due to its decentralized architecture. Hence, supply and demand dynamics strictly determine the price of XRP.
It’s worth noting, though, that since Ripple possesses a majority of XRP in circulation and in escrow, it can trigger supply shocks that could impact market dynamics and sentiment. This fundamental influence is one of their most significant points of correlation.
During Ripple’s latest round of fundraise in November, it secured over $500 million from large investors. These include Citadel Securities, one of the largest market makers in traditional finance (TradFi), as well as the Fortress Investment Group, Galaxy Digital, Pantera, Marsall Wallace, and Brevan Howard-linked vehicles. The event increased the company’s valuation to $40 billion.
Nonetheless, the $40 billion in capital accounts for less than half of Ripple’s XRP holdings. As of the start of December, the Crypto Valley Journal estimated that its token holdings were valued at approximately $83.3 billion. The numbers did not even include the XRP programmatically held in escrow within the XRPL.
A Leveraged Influence Rather Than a Direct Relationship
One can best characterize the correlation between Ripple’s growth and the price of XRP as a leveraged influence rather than a direct relationship.
While XRP operates independently, Ripple could be a catalyst for a price crash if it decides to dump all its token holdings. Conversely, a sudden decline in the digital asset’s price can also threaten the company’s financial stability and corporate valuation. Therefore, it’s imperative that Ripple ensure the maximum long-term success and adoption of the XRPL to maintain and grow the value of its primary asset, XRP.
Their symbiotic relationship guides Ripple’s strategic decisions. It reinforces its core correlation with XRP, meaning the institution can’t ignore or easily abandon support for the asset if it wants to thrive.
Disclaimer: The analysis and commentary featured in this article are only for informational purposes. They do not constitute financial advice or a product recommendation from the author or the Blockzeit team.
