Economic Model for XRP Valuation

[Achilles95]

What do you guys think of this simple equation for XRP valuation: 

$ Exchange Rate = Annual $ Transaction Volume/ (Velocity of XRP*Money Supply)

So for example, here is a rough back of the envelope calculation. Coinmarketcap.com currently shows that the current 24h transaction volume of xrp is 1.7 billion. Multiplying this by 365 to get annual transaction volume yields $620.5 billion annual transaction volume. 

Using the above equation, we can back out the velocity of XRP since we know the money supply and the exchange rate and the annual transaction volume. Hence, Velocity = $620.5 billion /($1.75 * 39 billion) = 9.09

Now assuming velocity of XRP is constant over time, we can begin to make forward predictions. Here is a sample: 

 

 

Edited January 16, 2018 by Achilles95

[Achilles95]

Also for the more academic out there, this paper nicely complements the recent market crash. 

Entitled "The Noise Trader Risk in Financial Markets" 

http://www.j-bradford-delong.net/movable_type/refs/Mozilla_Scrapbook3/DSSW.pdf

[EllBozzard]

Thanks for sharing!

[uzivert]

I agree with you; it's an interesting article.I'm not as good at financial forecasting as you are. I know that this is a significant disadvantage for me, particularly for my startup, because many people consider long-term planning to be the key to the success of a business strategy. It is easier for people with an analytical mindset to do this, and I focus on what I do better. However, many convenient financial tools and platforms help non-professionals like me, for example, https://sturppy.com/models/financial-model-for-saas. Even professionals use them to save time, like my friend who recommended it to me.

Edited May 31, 2021 by uzivert