Last week, a significant event took place in the Ripple market — sparking wild speculation about an impending XRP dump or pump.
An unidentified XRP whale moved over four billion XRP coins from a Ripple escrow wallet to a Ripple OTC Distribution Wallet.
Following the incident, some theorized that Ripple itself may be planning to dump a chunk of its XRP holdings to raise some money amid the ongoing market rout. Others speculated that it could be a sign that a large institutional investor is preparing to make a market-defining XRP purchase.
🚨 🚨 🚨 🚨 🚨 🚨 200,000,000 #XRP (69,838,754 USD) transferred from Ripple Escrow wallet to Ripple OTC Distribution wallet
— Whale Alert (@whale_alert) November 27, 2018
What do we know so far?
In December of last year, Ripple placed a total of 55 billion XRP into a number of time-based escrows as part of an effort to make sure that XRP supply is steady and predictable, which helps its trading stability and by extension Ripple’s cross-border payments business. Accounting for 55 percent of the total XRP supply, these escrows were programmed to release exactly one billion XRP into the market every month for the next 55 months.
In its Q3 2018 report, Ripple confirmed that it has been complying with this framework, announcing that it released 3 billion XRP over the course of the quarter and then removed 2.6 billion XRP of this total from circulation, leaving 400 million XRP to carry out a number of support functions across the XRP ecosystem.
On Tuesday, November 27, three huge XRP transactions took place within an hour of each other — transferring 2.3 billion XRP, 999 million XRP and 750 million XRP, respectively from one of Ripple’s escrow wallets to a distribution wallet.
This movement attracted a substantial amount of attention on Twitter. The responses generally fall into two camps — anticipating either an XRP market apocalypse caused by a Ripple selloff or an unprecedented and game-changing institutional purchase of XRP. Ripple itself has refused to be drawn, remaining silent since last week over the destination of the 4.04 billion XRP in question.
Impending Ripple Selloff?
According to received knowledge, the actions of a cryptocurrency whale may significantly improve or damage the market for that particular asset. In this case, because Ripple is known to control the escrow wallet the funds came out of, two schools of thought have developed on the matter.
The first school of thought believes that Ripple itself may be preparing to carry out a huge market dump in order to raise some money amidst depressed market conditions. With a total circulation of just over 40 billion XRP, such a move would represent a sell-off amounting to 10 percent of XRP’s circulating supply. In the current low volume bear market, this would at least theoretically send its price into a tailspin and leave thousands of investors holding a very heavy bag.
While the possibility of a Ripple-sanctioned XRP selloff cannot be ruled out, it is difficult to establish why Ripple would be willing to effectively tank its own asset price, especially as XRP has performed relatively strongly during Q3 2018 — overtaking Ethereum to become the second most capitalized cryptocurrency behind Bitcoin.
It would also be a clear violation of the company’s XRP supply policy which consistently focuses on trading stability and reduced volatility as it seeks to convince financial institutions around the world to join the Ripplenet. Unlike most other existing cryptocurrencies, the bulk of XRP’s total supply amounting to 100 billion XRP is held by Ripple, so it would be highly unusual for the company to effectively shoot itself in the foot by tanking its valuation and reducing its appeal to potential Ripplenet clients.
Possible Institutional Purchase
On the other hand, the large XRP movement would make perfect sense if Ripple received a significant XRP purchase order from a large financial institution. Whereas pulling 10 percent of its circulating volume out of escrow and dumping it on the market would be a very baffling business decision, it could be the case that either an institutional investor or a Ripplenet partner is behind the move.
This scenario, while impossible to confirm at this time, would also explain Ripple’s unusual radio silence regarding the matter. Typically, the company responds quickly and publicly to community concerns about its control over XRP supply. While making it clear that dumping XRP makes little business sense from its perspective, it took the decision last year to lock away 55 billion XRP in time-based escrow precisely for this reason.
Barring an unexpected and bizarre turn of events, it is thus extremely unlikely that Ripple is about to engage in a selloff. Whether this means that an institutional XRP purchase is imminent is impossible to establish at the moment until Ripple issues a statement.
What do you think about the massive movement of XRP? Let us know in the comments below!
Images courtesy of Twitter, Shutterstock.