Where Is Demand For XRP Coming From?

March 10, 2021 03:00 PM
Ripple Coin

Ripple Coin




Bitcoin (BTC) continues to rally while the rest of crypto sees mixed results. Spot volumes are roughly 75% of the 30-day average on the move.

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When Ripple CEO Brad Garlinghouse revealed the SEC was charging the firm for selling XRP as an unregistered security in December, the asset’s market cap dropped from USD 26 billion to a low of 8 billion. Since, however, XRP’s capitalization has recovered to a current USD 21 billion, begging the question: Where is demand for XRP coming from?

The SEC’s lawsuit against Ripple has resulted in numerous trading venues and crypto investment firms suspending XRP-related services. For example, Coinbase delisted XRP days after the news was revealed, while Grayscale began divesting its XRP holdings. 

In January, Tetragon Financial Group, which led Ripple’s 200 million funding round in 2019, began proceedings to redeem equity in the firm. This effort, however, was blocked in court given that the SEC has yet to establish that XRP is a security. Most recently, remittances firm MoneyGram decided to end its “partnership agreement” with Ripple, citing the SEC’s case. 

Documents from the case include allegations that a money transmitter found it to be more expensive to use XRP-based payments versus traditional rails and that Ripple compensated the transmitter in order to boost use of its solutions. 

In November, a planned airdrop of “SPARK” tokens to XRP holders began gaining attention. The airdrop would see the SPARK token— native to a network called Flare, which aims to give XRP smart contract capabilities— airdropped to XRP holders based on a December 12 snapshot of XRP holdings. That event coincided with an XRP rally that saw the asset’s market cap increase from USD 10.8 billion to 33.1 billion in November. 

The Flare network is expected to go live in March to May 2021, at which point 15% of Spark tokens will be distributed based on the December 12 snapshot while the remaining tokens will be distributed “over a minimum of 25 months and a maximum of 34 months.”

Google search trends suggest XRP has seen elevated attention since November. Google search data also reveals related searches surrounding questionable news stories with headlines such as “New Mastercard Card Offers Free XRP” or “How Bill Gates is Using Cryptocurrency Ripple to Fight Global Poverty.” At the same time, “XRP lawsuit update” is the number 1 related Google query. Google search data also shows that Turkey has the highest interest in XRP. 

Those assets that have been all but abandoned yet maintain lofty market caps aren’t rare in crypto, like Bitcoin Gold with a cap of USD 535 million. However, XRP is unique in that it’s a major asset with ample liquidity for traders to exit. While XRP is known to have one of the most loyal communities in crypto, one can’t help but wonder what’s driven demand for the asset, especially since the SEC case.

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FRNT Financial is a technology and sales layer that offers institutional and accredited investors access to various forms of exposure to crypto-assets. You can subscribe to FRNT Financial Morning Note at https://www.frnt.io/morningnote