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Hynzie

Volume and usage

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I am trying to work out the potential price per XRP should a certain level of credit transfers be processed through Fiat -> XRP -> Fiat. I keep coming up with a fractional value per XRP so must be going wrong somewhere - happy to be schooled on this:

 

Say there is 100 billion transferred through XRP daily. That's 4.2 billion per hour, 70 million per minute and 35 million per 30 seconds. 

XRP supply is in or around 45 billion, and say there is a close time per transaction of 30 seconds. 

Is the XRP value not then 35 million required for transfers every 30 seconds / 45 billion supply = fractional value per XRP.

These are obviously very simplistic calculations but I am trying to understand what I am doing wrong. 

Edited by Hynzie

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Well, the bigger the transaction, the more xrps you need to buy... As you can tell from exchanges, not everybody is selling xrps at the same price... 

So, if the current price is 1 xrp = 1 USD; and you want to send 1000 USD, you'd have to buy 1000 xrp... If the available xrps at 1 USD are less than 1000, you'll have to start paying more per xrp.

But, in a speculation-free scenario, unless I'm wrong... If the volume of payments is constant and the demand is always lower than the offer, then I guess you're right.

But in regards to finance, I'm not even qualified enough to be called a noob, so take this with a spoonful of salt.

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1 minute ago, BlackRainbowFT said:

Well, the bigger the transaction, the more xrps you need to buy... As you can tell from exchanges, not everybody is selling xrps at the same price... 

So, if the current price is 1 xrp = 1 USD; and you want to send 1000 USD, you'd have to buy 1000 xrp... If the available xrps at 1 USD are less than 1000, you'll have to start paying more per xrp.

But, in a speculation-free scenario, unless I'm wrong... If the volume of payments is constant and the demand is always lower than the offer, then I guess you're right.

But in regards to finance, I'm not even qualified enough to be called a noob, so take this with a spoonful of salt.

You're way off.  The link I posted above gives a pretty detailed understanding of how it works.  Also, xrp will not be pegged 1 for 1 when moving money. It can be scaled to (drops)

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Why would you use 100b volume daily?  Think that the initial premise/assumption may need to be firmed up before determining value.  With limited XRPs, value will be based on the law of supply and demand.  And no, most insiders/long term speculators like me would not give up any XRP at the equilibrium price even by twisting my arm.  My two cents ...

 

Edited by bookworm

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Thanks for the great article.

The issue I still can't get my head around is that XRP closes a transaction so quickly that each XRP can be re-used multiple times per day. So in the article the total daily trade volume $91.9 billion is divided by 65 billion XRP in available. But the 65 billion XRP availible can be re-used over and over each day so the real 'available' volume of XRP per day would be significantly higher keeping the XRP price lower?

 

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5 minutes ago, bookworm said:

Why would you use 100b volume daily?  Think that the initial premise/assumption may need to be firmed up before determining value.  With limited XRPs, value will be based on the law of supply and demand.  And no, most insiders/long term speculators like me would not give up any XRP at the equilibrium price even by twisting my arm.  My two cents ...

 

I just chose it as a starting point for the calculation. I could just of easily have used 1 trillion but by the same calculation method the XRP price is still very low. The point I'm getting at is will XRP demand ever be so significant that the price will increase substantially. When XRP can be re-used so many times per day that demand would have to be ridiculously high in order to increase the price substantially. 

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Some say the price will increase as demand for reserves of xrp increases and institutions source their xrp on open markets.  Don't underestimate speculation & fomo.   When multiple Billions start pouring in and all of the loose hands are shook out,  there's nowhere to go but straight up.   

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49 minutes ago, princesszerp said:

Hm... $1.43 by 2020?

I get the math he makes behind it, but... it seems very low, no?

How come a non institutional use case event like the opening of the Korean exchanges made the price increase 8 fold, but he just goes for a 7 fold increase of price assuming a quite vast adoption....

Scary...

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Yes I agree institutions holding XRP in reserve will impact substantially. I am a invested in XRP and I am highly optimistic about its future, it's only when I tried to work the numbers that I started to have my doubts.

In any case the XRP price has reached its value today without any real usage by banks, so once the bank demand starts to impact it should increase nicely.  

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1 hour ago, princesszerp said:

You're way off.  The link I posted above gives a pretty detailed understanding of how it works.  Also, xrp will not be pegged 1 for 1 when moving money. It can be scaled to (drops)

I think you misunderstood my post. Or maybe I wasn't clear.

I never said it was pegged. I used 1 USD for simplicity. If you have 1000 available xrp at 1 usd and the demand is constantly under 1000 xrp (not dollars, xrp) its value won't budge. If you need more than 1000 (e.g., 1300), those 300 will have to be bought at a higher price.

I said this because his/her post seemed to infer that the volume at any given time would be stable. In my opinion, the same daily volume with a different daily volume variance can have a substantial impact.

Also, at the end I was speaking hypothetically. 

If I'm still wrong, then I apologize.

Edited by BlackRainbowFT

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12 minutes ago, Hynzie said:

Yes I agree institutions holding XRP in reserve will impact substantially. I am a invested in XRP and I am highly optimistic about its future, it's only when I tried to work the numbers that I started to have my doubts.

In any case the XRP price has reached its value today without any real usage by banks, so once the bank demand starts to impact it should increase nicely.  

I got a bit scared and frustrated, too when I read the analysis in the link. I mean, it's still a nice increase and I've put quite a substantial (at least for me) amount in it. Seeing it "only" being multiplied by 7 or 8 is not gonna make me as filthy rich as these ETH hodlers have gotten. So... I'm a bit disappointed now tbh.

Maybe he's wrong.

I hope he errs on the conservative side.

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Spun differently ... assume 30% of the 20k FIs or about 7k make payments using XRP in 2020.  Out of the 60b supply, each would only have 9m XRP on average.  

Based on estimated $90b in 2020 per Izzy Otto (see XRP Valuation), each bank will settle about $13m (seems low?) so fair value may be $1.44 in 2020 or $0.83 in 2017.

Now the upside exists as this assume that all XRPs are freely available in perfectly liquid market with all FIs settling only $13m w/o any shortfall as shortages can be bought openly in the market.  Hmm, many VCs/insiders, staff and long term speculators (like me) will not freely sell their XRPs on the open market as is currently the case now.  

If we assume that 50% of the 60b XRP are not freely available in the market, we can derive a speculative fair price at twice of $0.83 at present value or $1.66 in 2017 ($1.44 x 2 = $2.88 in 2020) if XRP captures 35% market per Izzy and remarkably consistent with Kanaas' post (slide 8) of yesterday.

Edited by bookworm

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18 minutes ago, BlackRainbowFT said:

I think you misunderstood my post. Or maybe I wasn't clear.

I never said it was pegged. I used 1 USD for simplicity. If you have 1000 available xrp at 1 usd and the demand is constantly under 1000 xrp (not dollars, xrp) its value won't budge. If you need more than 1000 (e.g., 1300), those 300 will have to be bought at a higher price.

I said this because his/her post seemed to infer that the volume at any given time would be stable. In my opinion, the same daily volume with a different daily volume variance can have a substantial impact.

Also, at the end I was speaking hypothetically. 

If I'm still wrong, then I apologize.

I get what you mean - my point is that the close time for each transaction is so quick that demand would have to be truly enormous to increase the price significantly. So in your example someone wanting 'x' amount when only 'y' is available is highly unlikely when the total volume is currently 45 billion which can be re-used multiple times per day.  

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