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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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There are 12 Quadrillion Reasons XRP Will Never be Worth $50 a Token

Ripple is a system is optimized for permissioned financial institutions to transact directly with each other cost efficiently. XRP was issued as a liquidity management tool to facilitate transactions in illiquid currencies as needed across the network. So XRP will only ever be involved in a fraction of the activity flowing through the Ripple network.

You often hear Ripple mentioned as a potential replacement for SWIFT which dominants the cross border payments market for large institutions today. Presuming Ripple does displace SWIFT. It’s generous to assume XRP will be needed for 10% of SWIFT’s transaction volume or $500 billion daily based on it’s current volume of $5 trillion.

Because XRP is intended to help transactions flow across the network. I’d expect a limited holding period and frequent turnover as the institutions using the network are unlikely to want to hold it. So it might not accrue much value from the $500 billion of activity.

With a velocity of 10 times USD, another generous assumption as I’d expect it to be higher. The $500 billion of daily activity would translate into a value per XRP of around a $1.

From a top down valuation perspective it could potentially be worth more.

OnChainFX currently reports an NVT for XRP of 3.90.

NVT is the network value / average daily transaction volume. Network value is equivalent to market cap. So if XRP was to maintain this NVT while growing to $500 billion of daily volume. Its price would be $2 based on its circulating supply as of 7/2/2018.

Working from this value. XRP would need a transaction volume of 12.5 quadrillion to justify a price of $50 per token. This is why whatever the merits of Ripple’s technology because of its limited role in the network I do not perceive XRP as being investable?

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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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