Ripple Buyback Millions of XRP Off Secondary Market As ODL ‘Gains Global Momentum’

[HAL1000]

Ripple Buyback Millions of XRP Off Secondary Market As ODL ‘Gains Global Momentum’

https://thecryptobasic.com/2022/07/30/ripple-buyback-millions-of-xrp-off-secondary-market-as-odl-gains-global-momentum/

As ODL adoption spikes, Ripple said it would continue to purchase XRP from secondary markets.

Leading blockchain company Ripple disclosed in its recently-published Q2, 2022 financial report that it has been buying back XRP off the secondary market. 

The blockchain company noted that the purpose of the XRP buyback initiative is to sell the acquired crypto asset to On-Demand Liquidity (ODL) businesses. 

According to Ripple, the adoption of its ODL solution has grown tremendously in the previous quarter. ODL volume surged 9x YoY, the report noted. 

Notably, ODL customers have been utilizing the solution beyond domestic remittance and individual payments to bulk payments and treasury flows.   

“Ripple has been a buyer of XRP in the secondary market and expects to continue to undertake purchases at future market prices as ODL continues to gain global momentum,” an excerpt from Ripple’s Q2 2022 financial report reads. 

[thinlyspread]

In the Q2 report it says:

Quote

Ripple has been a buyer of XRP in the secondary market and expects to continue to undertake purchases at future market prices as ODL continues to gain global momentum. 

And shows the following: 

Can someone help me thrash this out a little more?

Is this saying the following (correct if wrong):

 — Ripple does not sell XRP unless related to ODL
 — The (ODL) sales are still far more than the purchases (why not more or less even?)
 — Being a "buyer of XRP in the secondary market" – that part is also related to ODL growth
 — Who holds on to this net selling of XRP – who is buying it? Are they selling it?
 — As XRP price/liquidity tanks, more XRP is required to cover the same USD/fiat amount for ODL/FX

I dont understand the dynamics here, still feels very vague. If they are always selling more than they are buying, for ODL, it means there is still (all else even) net negative (downwards) pressure on XRP from Ripple, and that ODL is still only possible due to an invisible "subsidy" paid for by retail/speculative/secondary XRP market as a whole. 

[Gringo]

Sales/Purchases  Sounds like trading, but the intention could be being a liquidity provider. The thing is, if they sell XRP to gain USD "liquidity", the actual "liquidity provider" is the market and not Ripple. Of course they are not taking out that USD liquidity (like Jed did).

Now the dynamics, if they use some of that "liquidity" as a "subsidy" for ODL users (buying back at certain XRP prices), then some of the "liquidity" is being drained not by Jed, but by ODL users. (ODL users just want to move USD from country A to country

If that's the case, then the casual XRP buyer is actually the "liquidity provider" of the whole system and that could be the reason why you don't see XRP at 1 or 2 USD levels, the "accumulation" of XRP can't beat the ODL users liquidity drain.

Back to "trading", if I were Ripple and had 50 B XRP, why would I just sell, if I could trade it forever and just take some liquidity from the market as my source of income using those XRP as my working capital?

It seems Ripple wouldn't let XRP tank to certain levels (and that was the case when they signed an agreement with Jed) but they wont let it raise at certain levels too, because they prefer to take liquidity from the market and use it for their ODL service. And of course, they wont publish that price range.

[Frisia]

19 hours ago, thinlyspread said:

I dont understand the dynamics here, still feels very vague. If they are always selling more than they are buying, for ODL, it means there is still (all else even) net negative (downwards) pressure on XRP from Ripple, and that ODL is still only possible due to an invisible "subsidy" paid for by retail/speculative/secondary XRP market as a whole. 

Could be true but the other side of the medal is that until recently only sales occurred. As it seems, this monthly amount is not sufficient to sustain the ODL demand hence the decision to buy ("buy back" is indeed a bit misleading in my view) from the secondary market. So gradually the sales is compensated by buying the token, which is a step on the right direction. Obviously, in order to sustain ODL, this buy is followed by a sell so in the end it will lead to an increase of volume rather than pure demand. I would be happy to hear other opinions...

Edited August 2, 2022 by Frisia

[Gringo]

I see that Ripple has taken 273 Millon USD out from the market on Q1 and has taken 408 Million USD dollars out from the market on Q2. They word it as "buyer of XRP in the secondary market" but it is actually net SALES of XRP.

That 681 Million USD drained in 6 months from the market is liquidity provided by XRP buyers. If Ripple would aim ONLY at making the ODL work smoothly then their "Sales (net of purchases)" should be 0.

In 6 month they made a "war chest" of 681 Million USD but of course they have operational costs as a company.

Anyway those 681 Million USD out of the system could explain an XRP of 0.37 and not (for example) of 0.50 And actual liquidity is more importan than 100 Billion of "traded" XRP/USD (you can buy and sell the whole day every day and create trading volume, it doesn't show if fresh liquidity enters the market or leaves).

The only positive aspect I see, is that they are building a USD "war chest" of an unknown amount to not let XRP price tank to certain price levels. And the negative aspect is they wont let XRP price raise beyond certain levels, because they are tempted to cash USD either for that war chest, for the subsidy of ODL users or for operational expenses of Ripple the company.

[InSilico]

Am I understanding this correctly? Are Both SEC, AND, Ripple overrunning XRP Investors?

[Gringo]

Ripple says that XRP is just "fuel" on the XRP Ledger needed for transactions. So if you need to move USD.Bitstamp from A to B you need some XRP.

They never ever say that if you buy XRP you could sell it at a bigger price and make some money.

The "funny" side is that Ripple DOES make money by selling XRP and not by just using it as "fuel" for the network. They don't make money by just reselling services related to the use of the network.

SEC doesn't like that Ripple makes money by selling XRP but at the same time gave the OK to Ethereum to raise money by seling ETH.

Since you are buying "fuel" for a network, it's like a commodity. Ripple has a lot of "fuel" and has no problem selling it. They self imposed the "1 B. XRP monthly" sell restriction with the Escrow, but that could be seen as a certain price guarantee to the market that could contradict the idea that "XRP is not an investing contract".

During the last years for most XRP holders, it has become more of an "entry key" for other tokens or networks airdrops rather than just "fuel" for using the XRP Ledger. For example: Sologenic, Elysian, Flare.

 

[BillyOckham]

6 hours ago, ****** said:

Ripple says that XRP is just "fuel" on the XRP Ledger needed for transactions.

I think you might be mischaracterising that aspect.  It certainly can be said but is nowhere near the whole story.

 

Fuel is NOT it’s main function.    It’s main function (as far as Ripple is concerned) is to act as a bridging currency.  Store of value is a hoped for aspect that may come into play if the volume explodes.

 

[Guest]

ODL sales include other businesses including line of credit. Loans of XRP are shown as “sales” for reporting purposes and when they are repaid, they are shown as “purchases”.

In addition, the most important thing needed for ODL is thin spreads and deep order books. It’s possible that Ripple’s market maker function is focused on helping maintain that liquidity.

Now that Jed’s liquidity is out, should be interesting to see how these numbers pan out.

[Gringo]

Quote

Now that Jed’s liquidity is out

I don't understand this point. The initial sell of XRP is not liquidity. Liquidity is the money used to buy those sales.

The "On Demand Liquidity" service uses liquidity from the market and NOT from Ripple. Ripple doesn't borrow USD to provide liquidity. Ripple SELLS XRP to cash USD and use SOME of that to provide liquidity for the ODL service. It means that in reality the liquidity is being provided by the "average Joe" XRP buyer. Else they would be netting 0 USD, they are not.

Ripple the company COULD raise more capital by selling shares or by becoming a public company, and use some of that capital to build liquidity for the ODL service, but is clearly not what is happening at the moment.

[BillyOckham]

2 hours ago, ****** said:

The initial sell of XRP is not liquidity. Liquidity is the money used to buy those sales.

What he was referring to was XRP liquidity.  Your statement is one sided.  For ODL to function well,  liquidity is required in BOTH fiat and XRP.

 

2 hours ago, ****** said:

It means that in reality the liquidity is being provided by the "average Joe" XRP buyer. Else they would be netting 0 USD, they are not.

While I think your statement is currently largely true,  I don’t think your logic is correct.  Just because there is liquidity doesn’t mean it’s all average Joe’s.  
 

Some,  and perhaps eventually, most,  liquidity can come from institutions and enterprises.  That is the aimed+for end state.

 

[JASCoder]

7 hours ago, ****** said:

It means that in reality the liquidity is being provided by the "average Joe" XRP buyer.

Liquidity is the Depth of Market on the order books of all the exchanges.
There is a velocity component that runs behind the scene, this is the arbitrage bot network run by market makers.

With ODL, it's generally being deployed in asymmetric corridors, and the Market Makers are the actors providing the fiat re-balancing, which has a cost and time constraints. 

The trades by "average joes" are mere perturbations lost in the noise. 

[Gringo]

You can twist the definition of liquidity because of marketing reasons, but the real definition still stands.

The reason why Ripple and Jed made an agreement is just because back in the day Jed's intention was to sell his entire stash until the last USD of liquidity was drained out (and he would still had some large stash left at 0 value).

Anyone can fork XRP and have his own 100 B XRP2 ledger. You will start with 100 B XRP2  and that 100B XRP2 wont be "liquidity" it will be a 0 liquidity network. 

So no, XRP is not liquidity, the demand side is the liquidity. And sistematically milking it is not the best thing to do, in my opinion.

Edited August 4, 2022 by Gringo

[BillyOckham]

4 hours ago, ****** said:

So no, XRP is not liquidity, the demand side is the liquidity.

I don’t understand your confusion.  Liquidity is required on both sides of the transaction.

The post that started this liquidity talk was asking about whether Jed sales stopping was going to affect XRP liquidity.  Actually in the ODL case it won’t have any effect since Jed sold on the DEX and ODL (so far) runs on enabled exchanges.

Also his sales would largely have gone to market makers whose business will probably subside a bit now on the DEX until things pick up.

XRP liquidity on exchanges is sufficient at the moment but unless ramped up will be insufficient for the volume if ODL gets into high gear.  However market makers will ramp up in concert if that were to happen,  and Ripple would increase sales until they hit their self imposed escrow ‘throttle’.  But that is a long way in future probably.

BTW….  liquidity means that no matter the size of a buy or a sell in itself it is not price affecting.  
 

Not enough fiat or not enough XRP available would both affect liquidity adversely.  No “twisting of definition” required.

 

[benstr]

On 8/1/2022 at 8:43 AM, thinlyspread said:

I dont understand the dynamics here

My interpretation of quarterly reports, specifically 'Total ODL-related sales'; I think this represents the Line of Credit facility utilized by all ODL customers. This number represents the total quarterly payments flowing through Ripplenet via ODL. 

The 'Total purchase' category represents, Ripple's buy back of XRP on the recipient side of the payment transaction. Total purchase are consistently less than ODL-related sales but within 80% of the sales number.

This is how ODL customers are now comfortable with finalizing payments via ODL.

With Line of Credit facility, they're not holding xrp. Thus do not have worries of holding a security, nor worries of price fluctuation or even fronting the face value of payment(?).

 

Edited August 4, 2022 by benstr