The relationship between Ripple’s XRP buybacks and their impact on price has long been a topic of heated discussion within the cryptocurrency community. Recently, a community member named Crypto Mark raised a valid question regarding Ripple’s strategy of purchasing more of the cryptocurrency. They argued that Ripple should be focusing on distributing XRP rather than buying more. This sentiment was echoed by many others in the community who believed that Ripple should own less XRP.
However, a renowned community member known as Mr. Huber provided a detailed explanation of the dynamics at play and emphasized the strategic rationale behind Ripple’s buybacks. According to Huber, Ripple’s transparency allows us to understand the necessity of their buyback strategy. He argued that if XRP has any use for Ripple, it is beneficial for them to buy on open markets to maintain market liquidity.
In his analysis of the market, Mr. Huber drew attention to several key patterns. He noted that XRP often experiences sudden and inexplicable price spikes, ranging between 30% and 100%, which are subsequently lost over several months. Interestingly, these price spikes tend to coincide with Ripple’s buybacks on open markets, which typically occur once a quarter with an 80% reliability rate. Huber further pointed out that when Ripple buys around $100 million worth of XRP within 1-2 days, it triggers a price spike of around 50%.
Recent data from Ripple’s API has revealed a notable decrease in the company’s buyback activity. According to the updated data, Ripple’s sales accounted for 167,758,585 XRP, with an average price of $0.62. This resulted in a total value of $104,010,323 between December 4 and 29, which is twice the usual sales volume of the previous 6 months. Mr. Huber speculated that Ripple may be looking to decrease this volume further with their next buyback.
When a user questioned the investment needed for a substantial increase in the price of XRP, Mr. Huber provided a clear response. He stated that $100 million dollars triggered a price swing of around 30-50%, indicating that for a 2,000% increase, one would need to expect at least 4-6 billion dollars in net purchases. This highlights the significant financial magnitude required for significant market movements.
To gain further insight, Mr. Huber compared Ripple’s sales and distribution strategy with other cryptocurrencies. He highlighted that the price action of XRP is primarily due to a lack of demand rather than Ripple sales, as evident from the comparison with SOL and ETH. Mr. Huber also noted that while ETH has seen reducing supply and transitioned to proof of stake, it hasn’t experienced substantial price action since the merge. Additionally, he highlighted that over the last 9 years, the supply of XRP has only increased by 22.73% more than Bitcoin.
At the time of writing, XRP is trading at $0.63135.
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