Last week, Ripple automatically released $3.28 billion in XRP tokens from escrow, sparking fears of a selloff. However, these fears were totally irrational, and whales took the opportunity to consolidate their holdings.
None of the alleged reasons to fear for XRP’s long-term health were validated. The escrow function has worked for years, and it’s intended to stabilize the token’s market. The XRP has already been returned.
XRP Escrow Debacle Explained
On the surface, Ripple should be having a great moment right now. Although it lost the cross-appeal for its famous SEC case, the Commission subsequently granted its biggest requests.
SponsoredThis has encouraged extra inflows and price jumps, but there’s been a snag. Two days ago, Ripple unlocked $3.28 billion of XRP held in escrow, triggering bearish sentiment.
Bill Morgan, a lawyer and prominent crypto analyst, explained why this shouldn’t have a long-term price impact:
Essentially, the community feared that Ripple released this XRP from escrow to make a major sale. Therefore, the narrative went, it’s imperative to dump tokens as soon as possible to avoid losing out. However, this doesn’t make sense for a few reasons.
For one thing, Ripple CEO Brad Garlinghouse endorsed the XRP escrow mechanism over seven years ago. The system is intended to ensure a predictable supply and stable markets; the SEC even lauded its accomplishments.
By keeping these tokens locked, Ripple maintains an extra tool to head off calamitous economic situations.
It seems strange to totally abandon that plan while Ripple is doing well. Even if Garlinghouse was deliberately spiking a successful program, now’s a strange time to do it.
Furthermore, similar XRP escrow unlocks often occur automatically at predetermined times. Since the rumors circulated, Ripple returned these tokens to the escrow account.
In other words, this escrow debacle didn’t impact the price of XRP in the long term. Some traders may have pushed this narrative to buy tokens at a premium, as XRP whales significantly increased their holdings while the selloff rumors circulated:
However, the whole thing seems to be a social media spectacle. Traders should be careful about believing exaggerated claims and unverified information, especially if they demand immediate action.
