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Steve Miller

Co-Founder at MPower365
Is a CFA® Charterholder and co-founder of MPower365.com. A site devoted to helping people integrate cryptoassets into their investment portfolios. The CFA designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis.

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.
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Also published on Medium.

Price Impact to XRP if Ripple Destroys SWIFT

Much less than you would think.

The success of Ripple and the value of XRP are only loosely connected. If Ripple would displace SWIFT and take on their volumes only a fraction of the 5 trillion would involve XRP.

And

Given the limited holding period for XRP and frequent turnover it might not accrue much value from the transactions it is a part of.

XRP is a tool for the Ripple network to facilitate transfers between illiquid currency pairs. Think two institutions coordinating over the network to exchange Kenyan shillings for Icelandic Kroners.

Instead of having to directly match this pair. XRP allows both parties to convert into XRP and make the exchange this way. So the vast majority of transactions flowing through the Ripple network will not involve XRP.

Top 4 currency types involved in transactions across the SWIFT network:

  • USD
  • Euro
  • Yen
  • Pound

Represent almost 90% of activity. For purposes of this analysis we’ll generously assume the other 10% would use XRP.

Note this would be unlikely as trades in Yuan, CAD, and the currencies of the Nordic countries probably wouldn’t need to use XRP to settle. So this would be the top end of what usage could be expected…

This leaves $500 billion daily volume involving XRP. $500 billion is still alot of volume so XRP still has alot of upside, right?

Probably not.

The institutions trading on the Ripple network are unlikely to want to hold XRP. Offloading it quickly in exchange for currencies more commonly used by their customers.

High velocity currencies only realize a fraction of the value of their trade volumes.

So compared to USD, which makes up approximately 50% of Swift’s volume, or approximately $2.5 trillion daily. It will be worth much less per dollar of volume because it will trade with much higher velocity.

Conservatively I’d estimate its velocity as 10 times higher than USDs. A decent proxy for transactional currencies value is daily volume / velocity. So $500 billion / 10 equals = $50 billion.

And

This number reflects the ceiling of the value of the increased volume because to be conservative I maximized it and minimized the velocity.

So the contribution to XRPs value from Ripple replacing the SWIFT network would be approximately 12.5 cents per XRP based on a circulating supply of 39,094,227,299 as of (3/26/2018).

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Steve Miller

Co-Founder at MPower365
Is a CFA® Charterholder and co-founder of MPower365.com. A site devoted to helping people integrate cryptoassets into their investment portfolios. The CFA designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis.

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.

Follow me


Also published on Medium.

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