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The reason Ripple (XRP) continues to fall and has a hard time recovering

Cryptocurrency

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Last year, Xip, the Ripple token, had the worst performance among the top ten cryptocurrencies, having lost almost half of its value in that period. Now, it has accumulated a 95% drop from the historic top recorded in early 2018. This may have something to do with the fact that its outstanding supply is growing at record levels.

According to data from Messari, XRP now has by far the highest inflation rate among any of the major cryptocurrencies, at 20.5% per year. There is currently 20.5% more XRP compared to that period last year. For comparison, Tezos is the only other cryptocurrency with an inflation rate above 10% (currently 13.1%); all other currencies have an inflation rate between 2.6% (EOS) and 5.1% (LTC).

While Tezos has similarly high inflation, its price performed well last year – an increase of 60%. However, he was able to take advantage of an increased interest in cryptocurrencies Proof-of-Stake.

On May 11, Bitcoin went through the third halving, cutting the rewards granted to miners in half and reducing the amount of new bitcoins per block to just 6.25 BTC. As a result, its inflation rate is now only 1.8%, which is lower than gold. This is also well below the XRP inflation rate.

As with fiat currencies such as the US dollar (USD) or the pound sterling (GBP), inflation refers to the speed with which the money supply increases. A high inflation figure indicates that there are a large number of new currency units coming into circulation and is generally considered to be a bad thing – since the purchasing power of currencies that are already on offer usually reduces.

The amount of XRP (green) in circulation is growing at an impressive rate. Tezos (purple) is not far behind. (Image: Messari)

Currently, there is a total of 29.86 billion XRP in circulation, according to Messrai, equivalent to just under 30% of the total XRP supply. (CoinMarketCap records 44 billion XRP, which would be 44%.) Bitcoin (BTC), on the other hand, has more than 87.5% of its total outstanding circulation.

It is not difficult to understand why XRP's circulating supply is also growing at an impressive rate. Each quarter, Ripple – the company that helps maintain the XRP blockchain – releases hundreds of millions of XRP from its guarantee portfolios. This XRP is sold to help finance company developments, develop the XRP token and integrate new partners, among other things.

"XRP sales are to help expand the usefulness of XRP – building RippleNet and supporting other XRP businesses," said Ripple CEO Brad Garlinghouse at twitter on May 22.

Although Ripple needs to finance its developments in some way, the practice is defamed by many in the community, who feel that Ripple is voluntarily suppressing the market with its sales. And they are right. According to the XRPArcade portfolio tracker, Ripple has unlocked a total of 5 billion XRP so far in 2020 – equivalent to five percent of the total offering. But it is still unclear exactly how much of this happened on public exchanges.

With an additional 49.4 billion XRP still locked into Ripple's custody contracts and 1 billion XRP scheduled to launch each month until mid-2023, this problem is unlikely to go away anytime soon.

* Translated and republished with authorization from Decrypt.co


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This source of this article is portaldobitcoin.com.

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