The mechanics of $XRP’s supply have come under scrutiny, prompting discussions around the potential dilution of holders’ investments. A recent analysis by popular crypto commentator Crypto Tony has brought to light concerns regarding Ripple’s monthly unlocking and selling of millions of $XRP tokens.
The crux of the situation lies in the history and structure of $XRP’s creation. Launched in 2012, all 100 billion tokens were minted at once. The founders retained 20 billion tokens while the remaining 80 billion were allocated to the company. Initially, there were no legal restrictions preventing Ripple from selling this supply freely for the first five years.
In late 2017, aiming to stabilize market sentiment, Ripple placed 55 billion $XRP into escrow accounts on the $XRP Ledger. This mechanism allows for the automatic release of up to 1 billion tokens each month. Although this might have been intended to dispel fears of market flooding, it has raised new concerns.
Each month, Ripple releases 1 billion $XRP but typically relocks between 60% and 80% of these tokens. The remainder, estimated at 200 to 300 million $XRP, is retained to fund the company’s operations. Crypto Tony argues that this ongoing dilution erodes value for long-term holders of $XRP. Ripple CEO Brad Garlinghouse has acknowledged that the company’s sales of $XRP play a significant role in financial sustainability.
Further complicating matters, Crypto Tony points to Ripple’s commercial partnerships as a means to indirectly influence the market. A notable instance involved Ripple paying MoneyGram over $61 million in market development fees, with MoneyGram selling $XRP immediately upon receipt rather than holding any inventory. The SEC has highlighted this arrangement in its complaint against Ripple, claiming that it essentially turned MoneyGram into a conduit for Ripple’s unregistered sales of $XRP.
According to Crypto Tony, this systematic dilution is largely why $XRP has seen a consistent decline for six consecutive months. He also cites co-founder Jed McCaleb, who left Ripple with 9 billion tokens and sold off approximately $3.2 billion worth over eight years, as another factor contributing to the dilution of holders’ assets.
As it stands, Ripple retains about 33.355 billion $XRP in its escrow wallets, raising questions about the future valuation and stability of the cryptocurrency.
