One of the biggest misconceptions surrounding Ripple (XRP) is that there is too much of it in circulation that its price will never rise significantly. But is that really the case? Is there a cap as to how much Ripple can grow? The answer is No, and XRP has proven this analogy wrong in the past. For instance, when it was trading at around $0.2, there were people saying that it would never reach a dollar, since it would give it a market cap way higher than most S&P 500 companies. XRP went ahead and hit highs of over $3, proving naysayers wrong.
People who argue about XRP’s high supply simply don’t understand the magnitude of the market that XRP is targeting. While 100 billion looks like a really huge figure, it’s a pretty insignificant figure in international banking. Just to give you context, international banking transactions are done through accounts known as Nostro Vostro accounts, and at any one point, it is estimated that there is $5 trillion in these accounts. Now how does XRP volumes compare? Suddenly those volumes become insignificant, right? If banks were to fully adopt XRP for cross-border payments, the supply would be quite low relative to its demand. In such a scenario, there is nothing that would stop XRP from hitting, $20, $30 or even $100.
The question then arises? Is the incentive there for such a huge adoption? Isn’t there a possibility of banks creating their own cryptos to serve the same purpose as Ripple (XRP)? Well, the answer is NO, there is actually no incentive. That’s because the whole essence of Ripple is to allow for value transfer without holding someone else’s value. In the case of banks, that value is in fiat. No bank wants to be exposed to another country’s fiat for long, because of the risks of value fluctuations.
Ripple eliminates this problem by giving banks a bridge to transfer value in less than 10 seconds. And in cases where they don’t want that exposure at all, they can use a third party who shoulders the risk. Can a bank owned crypto solve the same problem? Absolutely not! That’s because the bank would still carry the counter party risk, and still have to deal with the issue of Nostro Vostro.
With such a fundamental strength to the value of XRP, many investors are still wondering why its price seems stuck, even as it continues getting adopted by banks across the world. Well, it’s simple, banks have adopted it, but they are yet to completely grasp the system and its power in eliminating cross-border risk. That’s why Ripple is heavily focused on adoption first. Once that happens at scale, the value of XRP will naturally follow it. As a matter of fact, it is in the interest of banks for Ripple (XRP) to be priced higher, since it will make it more efficient in transferring large amounts of money.