XRP News Today: A lecturer now shares insights on XRP price dynamics while using a three-step framework that focuses on the critical factors.
Phil Kwok, a distinguished guest lecturer at Cambridge University and co-founder of the cryptocurrency education platform EasyA, recently shared his insights on the potential future of XRP’s price.
In a thought-provoking post on X, Kwok unveiled a three-step framework designed to evaluate blockchain ecosystems and their sustainability.
This framework focuses on three critical factors: supply, demand, and supply shocks, all of which play a pivotal role in determining the value of a cryptocurrency.
Understanding XRP’s Supply Dynamics
Kwok emphasized the necessity of comprehending the origins of cryptocurrency assets and their creation processes.
He highlighted that XRP has a fixed supply of 100 billion tokens, all of which were generated at the inception of the XRP Ledger.
Fixed Supply versus Inflationary Models
Unlike other cryptocurrencies such as Dogecoin, which exhibit inflationary characteristics, XRP’s structure is inherently deflationary.
Kwok pointed out an important aspect: out of the total supply, 80 billion tokens were allocated to Ripple, the payments firm associated with XRP.
For context, Ripple manages the majority of these tokens in escrow, releasing them into the market on a monthly basis, which can exert additional selling pressure.
As of now, data from XRPScan reveals that Ripple still retains approximately 37.7 billion XRP in escrow.
The Role of Demand in Price Valuation
Kwok further elaborated on the significance of demand as the cornerstone of a token’s value, marking it as the second step in his analytical framework.
He drew a clear distinction between utility tokens, like XRP, and meme coins, such as Dogwifhat (WIF).
While the latter often depend purely on speculative trading, XRP enjoys demand stemming from its practical applications within the XRP Ledger.
Utilitarian Aspects of XRP
Every transaction on the XRP Ledger requires XRP, including those conducted by major institutions.
Notably, the network also employs a burning mechanism that reduces the overall token supply over time; approximately 13.4 million XRP have been burned to date.
Kwok also underscored XRP’s functionality as a bridge currency for cross-border payments, facilitating seamless currency conversions—like those from Japanese yen to euros—by using XRP as an intermediary.
Ripple’s payment solution, formerly known as On-Demand Liquidity (ODL), significantly accelerates transaction processing times, reducing them from days to mere seconds.
This efficiency positions XRP as a compelling alternative to traditional cross-border payment systems.
The Potential for Supply Shocks
Kwok introduced the concept of supply shocks as the third element in his framework.
These events occur when the availability of tokens is abruptly restricted, which can dramatically influence market prices.
Mechanisms of Supply Shock
While mechanisms such as staking typically facilitate supply shocks, the XRP Ledger does not currently employ them directly.
However, Kwok noted recent updates and features that could generate similar effects.
The recent launch of automated market makers (AMMs) allows market participants to utilize XRP and earn returns as liquidity providers, potentially creating new dynamics in token availability.
Kwok provided examples from other blockchains, such as Ethereum and Polkadot, to illustrate how supply shocks can impact token value.
He pointed to Polkadot’s parachains mechanism, which locks tokens for extended periods, demonstrating how limiting supply can drive up prices.
Future Prospects for XRP
Kwok speculated that if the new features of the XRP Ledger successfully create supply shocks, the price of XRP could experience significant upward momentum, especially if demand increases with greater institutional adoption.
He noted that the potential launch of XRP exchange-traded funds (ETFs) could also contribute to heightened demand, although he did not elaborate on this point.
A Framework for Analysis
Kwok emphasized that his three-step framework is experimental and designed for ease of understanding.
It serves as a valuable tool for builders and analysts to evaluate whether a blockchain possesses true potential or merely functions as a speculative vehicle.
While Kwok presented a comprehensive analysis of the factors influencing XRP’s price, he refrained from making specific price predictions.
As of the latest updates, XRP is trading at $3.10.
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