Ripple is currently in a lawsuit with R3 seeking to prevent them from exercising an option to purchase 5 billion XRP tokens for 0.0085.
Ripple is portraying the deal as a partnership gone bad with R3 not living up to the commitments required to exercise the option.
So R3 has clearer language on its side with Ripple needing to prove its claims regarding the vaguer terms around the commitments related to the partnership agreement.
Ripple could end up prevailing. But it appears the burden of proof is on them so they have more of an uphill climb in making their case.
If R3 would win. It will have a negative impact to XRP’s price. The only question is the magnitude.
If R3 looks to liquidate immediately. The price impact will be severe. Not only from the sale but also from the interpretation of the sale. By crypto investors given the negative signal it will present for an already volatile news driven speculative asset as XRP has historically been.
If R3 looks to maximize the value of their stake and liquidate at a slower pace the impact could be relatively moderate.
5 billion represents 13% of Ripple’s current circulating supply.
Because it is heavily speculated in it is not uncommon for 4% of Ripple’s supply to turnover on a daily basis. Making it relatively liquid.
So if R3 liquidated their stake over the course of a year with the objective to liquidate 1% monthly. It would not impact the price much via trading activity.
The increased supply of tokens relative to current circulation would dilute existing investors. Resulting in a slightly negative impact similar to the dilution experienced by investors in stocks that issue a lot of options.
Visit the site to subscribe to the newsletter and stay up to date on his latest research into cryptoasset investing.
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
Latest posts by Steve Miller (see all)
- The Cryptoasset Flywheel - April 28, 2019
- Blocknet: Struggling to Gain Traction Amidst Competitive Pressures - March 17, 2019
- 10 Point Checklist for Auditing Cryptoasset Investments - March 9, 2019