A recently unearthed paper from 2018, co-authored by Robert Mitchnick, currently the Head of Digital Assets at BlackRock, and Stanford economist Susan Athey, has sparked renewed interest due to its ambitious valuation estimates for XRP. The study, which aimed to quantify the fair value of both Bitcoin and XRP, suggested that XRP could see a potential fair value around $32.
Market commentator AllInCrypto highlighted the paper’s significance, particularly since it sought to assess cryptocurrencies at a time when the market was still in its infancy. At that point, Bitcoin was trading near $7,000 while XRP hovers around $0.50, the same figure it reached as recently as September 2024. This period followed significant price surges in the previous year, though few analysts could provide insight into the mechanics of that rally.
### Study Methodology
The authors approached crypto valuation by framing Bitcoin and XRP as forms of currency serving two core functions: transferring value and acting as a store of wealth. They initiated their assessment by estimating user demand based on anticipated payment network utilization and potential long-term wealth retention, ultimately dividing this projected demand by the available supply of each cryptocurrency and applying traditional financial discounting methods to derive present values.
The framework they employed relied on eight critical variables: anticipated transaction volumes, average holding periods for coins, storage demand, total supply, upcoming issuances or locked assets, reserve ratios, discount rates, and the timeline for adoption stabilization.
### Fair Value Projections
For Bitcoin, the analysis posited that there would be approximately 18.2 million coins in circulation at maturity, paired with an estimated 12-year adoption curve. The potential daily transaction volumes were projected at between $5.6 billion and $28.2 billion by 2030. Should Bitcoin capture a percentage of global wealth akin to that of gold, the model indicated that storage demand could range between $1.1 trillion and $1.6 trillion, leading to a projected price valuation of $45,000 to $93,000. However, incorporating a mere 30% likelihood of long-term success adjusted this fair value to between $13,600 and $28,100.
In contrast, XRP was projected to have even more considerable prospects. The study suggested that transaction values might soar to between $190 billion and $556 billion daily across sectors such as remittances, corporate payments, and forex by 2030. With an expectation that XRP could garner 15-30% of the cryptocurrency wealth storage market, that equated to a demand ranging from $1.6 trillion to $3.2 trillion. While initial valuations placed XRP’s price potential between $6.37 and $32.91, factoring in just a 25% success probability narrowed the expected value to approximately $1.59 to $8.23.
### Current Market Context
Fast forward seven years, and market conditions display mixed outcomes. Bitcoin has significantly appreciated, now sitting around $116,000—a more than 1,500% increase since the paper’s release and above the predicted fair value range. Conversely, XRP trades at about $3, marking a fivefold increase yet still lagging behind the $32 success scenario outlined in the study.
The overall cryptocurrency market has expanded substantially, climbing to a total market cap of $4 trillion. Bitcoin currently retains 58% of that share, valued at roughly $2.31 trillion with a daily trading volume of $33 billion, while XRP now comprises about 4.5% of the market, with a valuation of $180 billion and daily activity of $4.14 billion.
Many analysts suggest that the U.S. SEC’s ongoing lawsuit against Ripple, which began in December 2020, has significantly stunted XRP’s price performance. Additionally, Mitchnick’s valuation hinged on XRP’s potential to dominate Ripple’s On-Demand Liquidity (ODL) offerings, which have yet to achieve full market penetration, as Ripple has since diversified into other sectors, such as stablecoins. Meanwhile, Bitcoin’s impressive rise can partly be attributed to growing interest from ETFs and treasury companies.
It’s essential to clarify that Mitchnick and Athey did not provide direct price predictions. Instead, their estimates reflected potential fair values of Bitcoin and XRP under specific favorable conditions.
In summary, while the paper has ignited fresh discussion around the potential for XRP’s valuation, the current market dynamics present a mixed reality that complicates predictions for the future of digital assets.
