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On a purely hypothetical and speculative level, when could a person who now holds 100k XRP hope to be a millionaire on that investment alone? 1 year? 10 years? 50 years? Within 10 minutes of this post? And explain why you think it will take your speculated time frame to reach that valuation... Hopefully this will be a fun, conjecture based post and subsequent replies...
Here I hope to highlight the complete fallacy of using the Market Cap for anything useful, particularly predicting future maximums, or even as a cross-crypto comparative tool. Disclaimer: As always, all of this is my opinion, so if you take issue with any of my statements, find the data to refute me, but don't expect me to 'jump' to your commands of 'prove it'. First, what is the definition of Market Cap? It's: (number of coins) TIMES (current price per coin) That's it. This simple formula, probably because of its simplicity, has lead to a rabid adoption by the general masses as some form of meaningful indicator. No serious investor acknowledges this sensationalist figure for technical analysis purposes, with perhaps the exception of its psychological effects on inexperienced traders. At this time, it's arguable that most of the money that sits in crypto is speculative, meaning investors hoping for the value to increase, as opposed to actually using the coin for transfer of value (purchases, etc.). This pool of speculative investor money is approaching maturity in that the cat is out of the bag for the most part so most potential crypto investors have already positioned themselves in the market, thus the early phenomenal historical gains of the past years, are unlikely to be reproduced by speculation money alone, simply because those gains were mostly due to the increasing awareness of crypto. Therefore, the pool of crypto value, while still growing substantically and crypto investing continues its mainstream adoption, isn't going to grow exponentially until a categorically new infusion of wealth presents itself. For the time being, this only really leaves opportunity for speculator sentiment to 'shift' wealth to the latest and greatest crypto, but the total real wealth increase has slowed. Back to Market Cap. I wish to dispel the two notions I mentioned earlier: 1) Myth: Each coin's Market Cap can be used to compare against each other The problem with the Market Cap formula is it attempts to answer a very complex question with too few variables; that question being, "what is the relative value of this coin to its maximum value?" Tricky question, because few people ask the question, "what decides the maximum value?" Time and time again, many people will erroneously use the leading coin's (Bitcoin) market cap as some sort of indicator of maximum market cap value for any other coin. How does this make any sense? Particularly if the coins are for completely different use cases. Why does Bitcoin's market cap have any relevance to Ethereum's, or Ripple's? Well, it doesn't, whatsoever; but, this is the psychological barrier put in place, presumably from instinctual impetus given that we see Bitcoin all grown up, so Bitcoin's siblings can't get much bigger right? They're not kids, so the first step to clearing the nonsense of Market Cap from your mind, is that one coin's market cap has anything to do with another coin's, for the same reason your kid went to college while the neighbor's kid smoked pot all day. 2) Myth: Market Cap can be used to predict maximum value Here's the really tricky part, and will form the remainder of this explanation. First, these are the important data points that need to be considered: - The maximum total of coins that will ever exist - The number of destroyed coins - The total coins currently in existence - The number of hoarded/locked coins - The number of utilized/circulated coins (this includes active trading) - The maximum value of market penetration (SWIFT market, retail market, lending, etc.) All play a part in the current value of a coin. Without using all these factors involved in calculating the potential maximum price for a coin, you end up with gibberish, so let's try to put some real values at work for Ripple. These figures are very very rough, just to demonstrate their relationship, not actually predict a value. maximum that will ever exist: 100 billion destroyed coins: a few million currently existing : 100 billion (minus a few million destroyed coins) hoarded coins: 55 billion in lockup, billions more remaining in Ripple, Inc. another presumably 25 billion held by investors and FI's in hodl psychosis. Say the total is 95 billion. utilized coins: (currently existing) MINUS (hoarded/locked coins). Plugging in numbers: 100 billion - destroyed coins - hoarded/locked coins EQUALS APPROX 5 billion maximum value of market penetration at any one moment: say $1 billion for our current active traders Couple things I wish to point out here. First, why would I say $1 billion market penetration when billions can trade in a single day on exchanges? Well, if I give you $20, and you give me back $20, do I have $40 bucks now? No, of course not. That's why you have to pick a point in time that asks, how much XRP is being utilized for a purpose at this exact second, similarly to how an exchange determines value, point in time. That's why I chose $1 billion (a completely subjective number of course, plug in whatever you want). Second, the last parameter "market penetration" MUST be entirely compensated for by the total value of all the "utilized coins" simply because inactive/destroyed/locked coins don't contribute to the facilitating of the market penetration, only the utilized coins can do that. In other words, none of the other values matter. Therefore, the value of XRP = (market penetration) DIVIDED BY (# of utilized coins). In real numbers: $1 billion DIVIDED BY 5 billion coins = 0.20 cents per coin. Coincidence?? (Not really, I massaged the numbers of course). What does this all mean for market cap? Who gives a damn what 100 billion total coins TIMES 20 cents equals, it's meaningless. The value of XRP only depends on the market penetration and the number of coins that can be utilized. That's it. The meaningful calculation for coin cap valuation can only be 5 billion * 20 cents = $1 billion dollars (again, plug in your own numbers), a far cry from the insane $9 billion bloated figure everyone is using. Now that we've eliminated the gross exaggeration of XRP market cap, the even trickier part becomes determining market penetration maximums. It's easy to say, well, SWIFT transfers trillions of dollars per year. So what! It's completely irrelevant what happens over a year. What is relevant is how much money is in transit at any given point in time. Let's say $500 million for fun. That means if SWIFT was replaced with XRP, then at any given moment, $500 million worth of XRP would be in use. This would add further demand on the 5 billion utilized coins, so add $500 million DIVIDED BY 5 billion utilized coins = 10 cents to XRP's value, for a total of 30 cents. Not what you were hoping for? But wait, there's more... Replacing SWIFT in my mind, is a credibility strategy by Ripple, not necessarily its golden egg. Once XRP gets this exposure, it will have its foot in the door and XRP will rapidly cascade into literally every other use case (of which there are infinite) that money itself currently faciilties, and at the same time radically accelerating each of those paradigms, and creating so many new ones we have yet to conceive because old-fashioned money couldn't support new ideas. Let's look at a few others: RETAIL: Who wouldn't want to aim their smartphone camera at an on-screen QR code at the cash register, and then be done. No more credit cards, no more remembering dozens of PINs and passwords, no more trying to re-activate your credit card from suspected fraudulent activity because the banks are knee-jerking at your irregular purchase of a smoothie. To hell with banks. Click, done. Gazillions of dollars. This is a much larger market than SWIFT in my opinion, solely based on the frequency of transactions that will require much more overall XRP to be in flight at any given moment. VISA, the writing is on the wall buddy... ADOPTION: Imagine when people, businesses, governments even, stop always converting back to fiat and just staying in XRP. This becomes the 'currency flight' turning point, and valuation will go into the hundreds to billions (DIVIDED by the number of utilized coins). Multiple dollars per coin. EDIT: a lot of people misunderstand this statement as replacing fiat altogether, that's not where I was going with it. It just means they are increasingly using it, and it just makes sense to hang onto XRP instead of quickly in-and-out LENDING: Here's where solid figures go out the door. With solid reserve lending laws already in place, and if adoption is widespread, more and more XRP will be needed, and that need magnified by the banks tendency to lend wealth they don't actually have (mortgages? CDOs anyone?). INVESTING: If you think lending is big, how about the huge margin investing that we've seen in investment firms. It get's maniacal EMERGING COMMERCE: Micropayments, robotic payments, and completely unknown revenue streams that couldn't exist without XRP, much like Uber couldn't exist without smartphones. SPECULATION: Riding on top of it all, there are people that understand the above, and will be in early, and accordingly the price will ride the speculative bubble before these ideas are set in stone, so theoretically, the price of XRP will perpetually be artificially inflated in anticipation of its eventual justification as the new markets embrace it. Suffice it to say, that the demand for XRP can easily eek into the trillions, even quadrillions, which DIVIDED by 5 billion, is many thousands of dollars per XRP. However dreamy and seemingly impossible these figures appear, that my friends is the potential market for XRP, beyond comprehension. So take your market cap and toss it in the garbage where it belongs. Will it hit any of these values? Who knows.. but what's important to recognize is that XRP doesn't answer to stupidity like: A TIMES B EQUALS Maximum, nor does it answer to Bitcoin, or SWIFT, or even the entire wealth of the world; it makes its own value. Yes, I meant 'rabid'
I am trying to value XRP at the moment and would like to know if im missing something. Current situation First off, XRP is currently trading at around $0.185 USD. There will ever only be 100 billion coins in existence and thus if price were to stay the same in perpetuity with all coins on the market, then the current market capitalisation would be $18.5 billion. Ripple's goal and target Currently, there is $155 trillion(On XRP website) in cross-payments globally annually. This is all being transferred as per Ripple "on an outdated system" and Ripple is offering a new method/medium to transfer this $155 trillion. So this is Ripple's target and we can say the demand for ripple if ripple is the new system and fully adopted is for $155 trillion of value of XRP. A bit of maths XRP's market cap currently (if all coins are tradeable), is $18.5 billion. There are two ways to service demand: - Increase market supply - Increase price Since there's a limit of only 100 billion coins, then in order to service the demand of $155 trillion, the price of XRP would need to increase. However, this $155 trillion is the annual amount in cross-payments, banks turnover money every day and therefore when pricing xrp, the amount of demand should be daily. So per day, the amount of cross-payments is $155Trillion/365 =~ $420billion/day. In order to service this the price would need to increase by (current market cap)/(estimated daily demand) =~ 23 times. Conclusion So the max price, in order to service all the demand in the world (assuming 100% adoption as we want to know max value of XRP) is = current price * multiplier(found in previous section). = 0.185 * 23 =~ $4.25 Is this the max price of Ripple? I do not see why the price would need to be higher than this as this is enough to service all the demand in the world daily. Of course there is growth in the world (globalisation etc.) that would increase the amount of cross-border payments and hence XRP price but that is the stable growth stage (slow growth stage). The price increase to $4.25 would be considered the high growth stage and where you would, "make quick money". 23 time return is very nice but I expected the high growth to be much longer and more potential for XRP (reaching the double digits and maybe triple) but the maths is saying that this is the max it will go. Am I missing something here? Thanks!
Hi everyone, Ripple the company has a very clear business model in disrupting the currency payments system. Can someone explain why XRP is relevant in this process? Can't Ripple succeed and make billions of dollars without XRP. Thanks
They are heading down the back stretch........ BTC and ETH holders are you watching the same race we are watching? It's not Secretariat......it's RIPPLE/XRP!