Ripple XRP and market cap explained

Many pundits say that for XRP to reach, say $100 per coin, the market cap would be 3.8 trillion dollars (38b coins in circulation), and that that would simply be too much money to have to be invested in XRP. But that’s not how it works, as for XRP to reach $100, it would NOT require $3.8 trillion to be invested.

Market cap is basically [last trading price] multiplied by [number of coins in circulation]. That’s it. To illustrate this simply, let’s use three tennis balls, and 4 friends: Laura, Tina, Will, and Chris.

Monday: Laura has all 3 balls

Tuesday: Laura sells 1 ball to Tina for $1

Wednesday: Lina sells another ball to Will for $1

Thursday: Lina sells the final ball to Chris for $100

So that means a total of only $102 dollars have been invested into the balls. But the market cap is $300 (3 balls multiplied by the last trading price of $100). Now you can see how flawed the market cap limitation is? It is NOT the amount that is required to get XRP to a certain value per se, as all previous coins prior to the last trading price were acquired with a lower trading price.

Of course the circulating number and market cap do have a role. Let’s take another scenario:

Monday: Again, Laura has all three balls.

Tuesday: All the others are willing to buy the balls for $1 each. So if this event happened, the market cap would be $3.

Wednesday: Laura comes around with an extra three balls. But the three friends are still only willing to pay a total of $3 dollars together – i.e. 50 cents each for a ball. Thus in this scenario, the increase in circulating number has resulted in a drop in value to 0.5 cents per ball.

Thursday: All three friends were given an extra $1 by their parents today. Now, they are willing to pay $1 for each ball again , thus in this scenario, even though there are now 6 balls vs 3, the value of each ball remains the same. This essentially is the argument against a large circulating supply of XRP being non-valuable. If people are willing to pay a certain amount per XRP due to it’s valuable use, then that is the value, regardless of the supply number.

Also don’t forget, XRP is not a company. It’s not like, say if Apple has a certain market cap that was quite large (as is the case), therefore it’s value would allow it to use the money that the public investors have invested in it to purchase many things. This is not the case for XRP, it’s bits that are owned by different people. And please don’t bring up the fact that Ripple owns a lot of XRP, that’s been locked up in an escrow…

So there you have it, spread the good word, and if you’re already a big holder of XRP, or thinking of getting in, remember the value of XRP is increasing fast. So don’t forget to store XRP safely by using a hardware wallet. So don’t forget to store XRP safely by using the popular and trusted Nano Ledger S Hardware Wallet. Also, Amazon has a range of cryptocurrency wallets, accessories, and tools, as well as books on cryptocurrency investing. For information on how to buy XRP, click here. For information on how to buy XRP, click here.

If you have been chatting with colleagues, friends or family members, or anyone that is on the fence or uncertain about XRP, direct them to this article: Ripple XRP – debunking the myths.

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Disclaimer: This post is my own personal opinion. I am not a professional financial adviser and am not responsible for your own investment outcomes. 

Disclosure: At the time of writing this post, I hold units of XRP.


Categories: Ripple XRP

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  1. Ripple XRP – debunking the myths – Zerpening

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