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xRapid may not help the price increase of XRP?


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21 hours ago, xSODAx said:

Yes, that is the explanation:

If the RippleNet has to execute billions amnd trillions of micropayments  all over the world whoich sum up to 100 billion USD then V (velocity of XRP) is increasing sharply -> p increasing

If RippleNet has to execute only 1 transaction also worth 100 billion USD then V stay at a very low level and - to equal this equation - p has to decrease.

Now I understood. Using the model MV=PH, it seems to be clear if V increases faster than H, then P must go up. Something contradicting to a general notion is that when V is constant and H increases, then P is going down. In other words, a higher volume can results in a lower price if a circulation rate (or velocity, V) stays at constant. 

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This is true of how xrapid works, however you are assuming private investors and larger fund investors will not get involved in the party and hold xrp for any period. Even today without any usage at a

What I understand how xRapid works is: (1) buying XPR in a exchange with a local fiat (e.g., Japanese Yen), (2) sending the XRP to another exchange in a destination country (e.g., Philippine

Please read D.S.' reply to this question If banks use Ripple for payments but don’t need to buy XRP, then who will buy XRP and why will its price increase? Does it make any sense to invest in XRP

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On 9/21/2018 at 5:17 PM, xSODAx said:

I have to admit that my economics degree was already 25 years ago and that the transfer of this economic equation to the XRP ecosystem also causes some headaches - espacially T and V.

I try a new attempt to explain, but probably need some help from those whose studies may be more up to date.

Have now downloaded some of the scripts from some universities and have found this version here, which explains the context for me at least more understandable. But I have still trouble to explain V (velocity of circulation) within the XRP ecosystem.

 

M (money supply) x V (velocity of (money) circulation) = P (price) x H (volume of traded goods)

This equation shows that as the tradingvolume increases, either the price must go down or the left side M, V must rise for the equation to remain valid.

M should actually be the current available money supply: Current Money Supply (39.9 Mil. XRP) + monthly escrow releases - HODLed XRPs

H: increasing with 24hrs tradingvolume (1 year trading volume) - value (in USD, EUR, BTC, ETH etc.) that is moved within RippleNet

V (velocity of (money) circulation) := the speed at which money changes hands
The more (xRapid) transactions are executed, the faster the velocity of circulation. So, if the price stays constant, but trading volume increases, then the price development depends on how often a coin will be used (on that day). If that higher trading volume means that V is increasing faster (and higher) then the equation is just not the same: The price has to go up.

 

 

Now everything should be clear, right?

 

But I stick to my opinion:

Technological progress (xRapid) has no impact on price because it simply speeds up transactions between market participants. But if the rate of turnover would hit "technical limits" then with higher trading volumes the price would have to go down so that the equation remains valid. So xRapid overcomes these limits and the prices remain at least constant or can continue to rise.

 

 

 

The following link provides an good example of using the equation MV=PQ for the valuation of crypto currencies. In this article, INET (not XRP) was used as an example.

https://medium.com/@cburniske/cryptoasset-valuations-ac83479ffca7

The author of the article Kindly provides an excel file, in which the XRP value is estimated using the equation. 

https://drive.google.com/drive/folders/1SB_9CCcuu9N70Xr-9Uqi16oN-X9DwPna

To briefly summarise, the global cross border transactions is assumed to be 15 trillion USD and this increases by 4% annually. 

The total addressable market of XRP is assumed to be 50% in the future.

So, PQ = (15 trillion + 1.04^y) x 0.5. (Note that y represents years that XRP might take years to reach 50% of the market share). 

The author assumed V is 10, so M = (15 trillion + 1.04^y) x 0.5 / 10.

The resulting M represents the future value of XRP in y years from 2018. 

Please note that the addressable market size of 15 trillion seems to be a couple of years ago, so the spread sheet adds 2 to y. 

Hope this is a helpful :)

 

 

 

 

 

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On 9/18/2018 at 10:22 PM, Honeysyd said:

(3) three exchanges are currently onboard: Bittrex, Bitso, coin.ph. The combined trading volumes of XRP in these exchanges are not high (less than 5 million dollars per day). I wonder if this can cause any issue for sending a large amount of money through xRapid.

 

I have switched to using Bittrex from Binance, although I still use Binance.

I am in the US and like the fact that Bittrex is based in Seattle.  

However, the liquidity on Bittrex is far from Binance's.  In addition, market orders cannot be placed for retail customers (I typically use limit orders).  If you have ever used Bittrex and set Limit orders you see how the slow these transactions take place.  I think that Bittrex has removed market orders to help protect customers, and potentially because the overall liquidity is low, customers were getting orders filled throughout the spread and didn't like that.

I assume with XRAPID that there will be an allowance of market orders for these transactions, otherwise I don't see how these transactions will be processed in a timely fashion, especially with large amounts of fiat value.

Again, it may be that there is a separate setup for XRAPID with Bittrex.

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On 9/19/2018 at 1:22 AM, Honeysyd said:

What I understand how xRapid works is:

(1) buying XPR in a exchange with a local fiat (e.g., Japanese Yen),

(2) sending the XRP to another exchange in a destination country (e.g., Philippines)

(3) the received XRP is sold with a local fiat in a destination country (e.g., Philippine Peso).

For the domestic transaction, the same exchange may be used and therefore (2) is not relevant.

 

My questions are,

(1) as given in the above description, XRP will be bought and sold almost instantly for transactions through xRapid. So, the demand of XRP is almost instantly offset by selling XRP in another exchange (for international transactions) or in the same exchange (for domestic transactions). So, how this can increase the price of XRP?

 

(2) the current marketcap of XRP is about 10 billion dollars. So, the XRP price would not go up if the transaction volume at any given moment is not consistently over 10 billion.

 

(3) three exchanges are currently onboard: Bittrex, Bitso, coin.ph. The combined trading volumes of XRP in these exchanges are not high (less than 5 million dollars per day). I wonder if this can cause any issue for sending a large amount of money through xRapid.

 

Any comments would be appreciated.

See the quote below from David Schwartz aka @JoelKatz from a question on Quora regarding how mass xrapid adoption might affect xrp value.

"It could create a significant source of additional demand. If xRapid is broadly adopted, that means that a significant number of international payments use XRP as an intermediary asset in the payment.

A lot of companies need to make rapid payments throughout the world. The most dramatic example is Uber. If someone needs a few extra dollars for groceries, Uber wants them to drive for them right then. For that to work, Uber has to be able to get the money to them as soon as they finish driving.

Similar situations clearly apply to companies such as AirBNB and Amazon. But even more traditional companies like Seagate currently stash millions of dollars around the world to permit them to make faster domestic payments rather than slower international ones. You can think of xRapid as converting an international payment into two domestic ones plus a movement of XRP.

So what might companies do in the world where xRapid is widely used?

First, they can buy XRP very cheaply, possibly even below market value. Why? Because they can just wait for somebody to make a payment where they have the currency the payment tries to deliver. They can take the XRP the sender got in exchange for the asset they’re paying with and provide the asset they’re delivering to the recipient. This is precisely what xRapid does, and companies can take advantage of it to buy XRP cheaply.

Second, they can use XRP to make cheap payments. Why? Because if those payments are using xRapid, they can just use the “from XRP” half of the payment and roughly halve their costs. Again, this is precisely what xRapid does.

This only works if they keep a pile of XRP around to match the times when other people need the assets they hold to the times when they need to make an outbound payment. Essentially, instead of keeping many piles of money all over the world to handle their international payments, they could just hold one pile of XRP to convert international payments into domestic ones in all the corridors where there’s sufficient deployment of xRapid.

You might think that due to the system’s efficiency advantage over current schemes, those piles wouldn’t need to be as big. That’s true. But it’s possible that this can cause a Jevons paradox.

A Jevons paradox is a situation where needing less of a good to accomplish some particular result means that people actually want more of that good. For example, an improvement in the efficiency of coal burning power plants that meant that you needed 15% less coal to get the same amount of electricity wouldn’t decrease coal consumption by 15% but instead would likely increase it as people built more coal-burning power plants instead of natural gas because coal would now have a competitive advantage.

The same thing could happen here. If XRP becomes much more efficient for international payments, then companies that currently don’t keep piles of money around the world (because it’s too tedious and inefficient) and instead rely on correspondents for their payments (and possibly make fewer of them as well) would find it cost effective to hold XRP. In other words, as less XRP is needed to make a wider array of payments, more and more organizations would find XRP worth holding."

Edited by JackTheRipples
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