Jump to content

The starting number for utility-based price estimation


Recommended Posts

  • Replies 76
  • Created
  • Last Reply

Top Posters In This Topic

Top Posters In This Topic

Popular Posts

There's been numerous threads about utility based analysis of how high XRP price could rise.  Here is one example:  https://www.xrpchat.com/topic/18706-xrp-market-potential-value/ I've created th

It's really, really, really, really hard to quantify the value based on use. For example, suppose XRP captures 100% of daily SWIFT flow. It's not as simple as dividing that number by nbr of coins

Everyone in this thread should read Milton Friedman and Anna Schwartz's Monetary History of the US from 1867-1960.  Specifically the discussion devoted to the velocity of money because higher velocity

When discussing utility price, I believe it is also necessary to discuss the elephant in the room, which is Market Cap.  I am not a fan of Market cap because of the negative connotation it has with regard to the crypto space, however I believe it needs to be addressed when it comes to making price estimates based on utility.

I have heard people talk about reaching the market cap of gold, which is 7-10 trillion.  25% of a 10 trillion MC is 60-70$ token.  Can the cap reach that high at some point?  Can the cap reach 20 trillion because XRP is something we have never seen before?

These are questions that I feel are important when talking about utility based price estimations. 

People in this thread will discuss getting a percentage of all the things @Hodor laid out.  I 100% believe in all the use cases of XRP.  I am just wondering what the "limit" is based on math calculations.

Interested to hear everyone's thoughts 

 

Link to post
Share on other sites

It's really, really, really, really hard to quantify the value based on use.

For example, suppose XRP captures 100% of daily SWIFT flow. It's not as simple as dividing that number by nbr of coins. We need to take a guess (and that's what it is) of how many XRPs are dedicated to that usage. XRPs being used elsewhere, held as investment, in escrow, on exchanges, etc. all reduce the number available to service SWIFT flows. How do we make an educated guess? Second, the total daily SWIFT volume is not the amount we calculate from. We need to know the busiest period of the day and how fast XRP will be recycled within the system. Just because it's sent one direction, doesn't mean it's automatically available for use 4 seconds later. 

Then multiply those complexities across all the other commercial usages that will arise: trade finance, FX replacement (to avoid holding mutiple fiats), greasing the wheels of payment providers/credit cards/webpayments,  insurance claims,  central bank corridors, etc. Factor in a multiple for Jevon's paradox. Then think about future use cases beyond these - real estate settlement via Codius contracts for example, derivatives settlements, micro-financing, base denomination for managed and hedge funds, etc.

And then remember that the pool amount for one use decreases the amount available for other uses. Every factor has an upward pressure on price.

I literally gave up trying to value it all. But by all means, the smarter minds here may come up with something.

Ps. And this is all also why market cap is a meaningless metric when it comes to XRP.

Link to post
Share on other sites
53 minutes ago, CoachOgden08 said:

When discussing utility price, I believe it is also necessary to discuss the elephant in the room, which is Market Cap.  I am not a fan of Market cap because of the negative connotation it has with regard to the crypto space, however I believe it needs to be addressed when it comes to making price estimates based on utility.

I have heard people talk about reaching the market cap of gold, which is 7-10 trillion.  25% of a 10 trillion MC is 60-70$ token.  Can the cap reach that high at some point?  Can the cap reach 20 trillion because XRP is something we have never seen before?

These are questions that I feel are important when talking about utility based price estimations. 

People in this thread will discuss getting a percentage of all the things @Hodor laid out.  I 100% believe in all the use cases of XRP.  I am just wondering what the "limit" is based on math calculations.

Interested to hear everyone's thoughts 

 

So in one respect I believe market cap is essential and probably should be renamed this...purchasing power. If you consider how much money is to be sent with wide spread adoption then XRP needs to have purchasing power so great that it doesn’t fluctuate. Now, market cap is not a good indicator of the amount of money injected into a specific coin just like the stock market uses P/E ratios to show the inverse of what I’m talking about, meaning more money has been injected into a stock than the company is really worth. So, I say all that to say that YES XRP can reach a multi trillion dollar purchasing power, and needs to, in order to have liquidity to facilitate all that it is intended to do. It also NEEDS to have 100 billion coins to build that purchasing power and stability otherwise early adopters or major FIs could buy up vast sums and manipulate the market. Ripple knows what it is doing and I believe they will achieve a massive market cap/purchasing power.

Link to post
Share on other sites
2 hours ago, Hodor said:

There's been numerous threads about utility based analysis of how high XRP price could rise.  Here is one example:  https://www.xrpchat.com/topic/18706-xrp-market-potential-value/

I've created this thread to throw out what I consider to be a good "starting point" for utility-based analysis.  Personally, I struggle with the finer-grained differences between the potential markets:

  • B2B (Business to business)
  • P2P (Peer to peer or person to person)
  • P2B (person to business)

Once we zero in on one of these three categories, we can then further categorize the markets and get some historical numbers to plug in.  For example, within the category of "P2P" are remittances across borders such as what MoneyGram handles along with Mercury FX, Flash FX, IDT, and Cuallix.  Also American Express and Western Union now! 

I wanted to create this specific topic as a stand-alone thread before I then take the number and extrapolate to use it in a utility-based analysis of XRP price. 

In the past, I've used old SWIFT numbers.  I've seen other authors manage to get their hands on other numbers as well, but I'm not sure if some of those overlap or should be considered separate from each other.  For example, is the CHIPs system accounted for in the SWIFT number?  I don't think so, but I'm not sure.  We'd need somebody 'from the industry' to comment on some of the numbers that would comprise our starting point for utility-based estimation of XRP price. 

Let me know if you feel strongly one way or the other, or are from the industry and have some valuable sources of statistics to contribute. 

Thank you!

Do you guys think that derivatives settlement could potentially fall under two categories? B2B and P2B? @OzAlphaWolf It's a huge market regardless so even gaining some market share for xrp as a settlement layer will drive value, depending on velocity. 

Edit: It might also be interesting to also know a rough ballpark of how many XRP are held by founders/individuals (hodler's) with no intent to sell since those units aren't circulating on exchanges or on the XRP ledger I would argue we can deduct them from the 100 billion (and declining) XRP, available to facilitate all use cases.

Edited by Mpolnet
Link to post
Share on other sites
29 minutes ago, Raz said:

So in one respect I believe market cap is essential and probably should be renamed this...purchasing power. If you consider how much money is to be sent with wide spread adoption then XRP needs to have purchasing power so great that it doesn’t fluctuate. Now, market cap is not a good indicator of the amount of money injected into a specific coin just like the stock market uses P/E ratios to show the inverse of what I’m talking about, meaning more money has been injected into a stock than the company is really worth. So, I say all that to say that YES XRP can reach a multi trillion dollar purchasing power, and needs to, in order to have liquidity to facilitate all that it is intended to do. It also NEEDS to have 100 billion coins to build that purchasing power and stability otherwise early adopters or major FIs could buy up vast sums and manipulate the market. Ripple knows what it is doing and I believe they will achieve a massive market cap/purchasing power.

http://woobull.com/introducing-nvt-ratio-bitcoins-pe-ratio-use-it-to-detect-bubbles/

Interesting article suggesting that market cap might be better as "Network Value" from which we can try to come up with a Network Value/Transaction Value ratio. The author of the article argues that this could be used in place of a P/E ratio

Link to post
Share on other sites

I don't want to hijack but i'm curious as to what timeline people here have in mind as to when XRP will finally start seeing it's real value based on utility as opposed to speculation. I'm of the opinion that we have only scratched the surface of what speculation can do for the value of XRP. With that being said though, I have no idea what utility will do. All I can say is that imo, the utility driven value of XRP is 2-3+ years away, and I don't necessarily think that's a bad thing ;)

Link to post
Share on other sites

I'm sure Ripple has a pretty decent idea of multiple price ranges that are possible based on many different hypothetical variables. They also seem very confident that XRP will have to increase in value as adoption grows. 

When it comes to the time frame, I like to take Brad's words at face value because he seems to be a decently readable and straight forward type of person. He says he is really long XRP and thinks of it's price in terms of 3-5 years out. I believe this reflects the Company's internal XRP price models as far as the time frame for real, substantive growth to begin. 

As far as price goes, I feel that there are so many different variables that come into play that even Ripple employees are suprised sometimes. However, although no one actually knows the real price potential, Ripple is likely the most privey to the possibilities due to their ability to access certain market statistics, financial experts, and top rated economic forecasting professionals. I think those figures are some of the best kept secrets Ripple has. If they ever got out, the speculative market would be in a frenzy. 

Link to post
Share on other sites

https://www.mckinsey.com/~/media/McKinsey/Industries/Financial Services/Our Insights/A mixed 2015 for the global payments industry/Global-Payments-2016.ashx

http://image-src.bcg.com/Images/BCG-Global-Payments-2017-Oct-2017_tcm9-173047.pdf

https://www.bnymellon.com/_global-assets/pdf/business-insights/global-payments-2020-transformation-and-convergence.pdf

https://www.earthport.com/wp-content/uploads/2014/02/Cross-Border-Payments-Perspectives-A-Glenbrook-Earthport-Research-Brief.pdf

Here are some various reports I've found that could potentially help us narrow down and breakout the size of potential addressable markets for XRP and how fast those markets are projected to grow over time. I haven't had time to read through these due to work however, I will work on getting through some of them. If anyone would be so kind as to assist in summarizing the addressable market it would be greatly appreciated. 

Link to post
Share on other sites
17 hours ago, Mpolnet said:

http://woobull.com/introducing-nvt-ratio-bitcoins-pe-ratio-use-it-to-detect-bubbles/

Interesting article suggesting that market cap might be better as "Network Value" from which we can try to come up with a Network Value/Transaction Value ratio. The author of the article argues that this could be used in place of a P/E ratio

So in a way this compliments what I was already thinking?

Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.