finbold.com
Ripple, XRP Ledger’s (XRP) core developer and largest holder, will unlock 1 billion tokens this Friday, November 1. At current prices, this unlock has a nominal value of above $520 million, part of which Ripple will eventually sell.
Notably, the currently locked 1 billion XRP—together with over 40 billion more—is not counted as XRP’s circulating supply. Thus, unlocking and selling a fraction of these tokens will effectively inflate XRP’s supply, diluting other holders’ value.
This dilution’s effects can be varied, potentially even directly affecting XRP’s price as the market speculates on the potential outcomes. Interestingly, XRP dropped aggressively on October 1 and 22, right after last month’s unlock and 200 million tokens’ selling, respectively.
As of this writing, XRP is trading at $0.524, down 16% in the last 30 days, showing weakness.
XRP tokenomics: Ripple holdings, unlocks, and selling
XRP’s tokenomics are based on a fixed supply of 100 billion tokens, all created at its launch in 2012. Unlike Bitcoin (BTC), XRP was entirely pre-mined and arbitrarily distributed, but no new tokens will be generated.
Ripple Labs, the company behind XRP, initially held a significant portion of these tokens. Between 2012 and 2017, there were concerns about Ripple’s sales of XRP and a perceived lack of transparency. Critics worried these sales could impact the token’s value and market dynamics.
In response, Ripple took steps to increase transparency and stability. In 2017, the company placed 55 billion XRP into cryptographic escrow accounts. Each month, one billion XRP is released from escrow, and FInbold has covered all these recent events since August 2023.
Essentially, Ripple uses a portion of these sales to cover operational expenses and invest in the XRP ecosystem. After unlocking, the company returns around 80% of the tokens to escrows, extending the release schedule and providing predictability.
What is Ripple’s unlocked XRP used for?
As observed in October’s chart, Ripple’s selling strategy funds its ongoing operations but also affects the market. However, Ripple maintains that controlled releases and reinvestment support the token’s long-term growth.
Yet, some uses of these reserves have also generated controversies among different groups of supporters. On October 21, a few hours before the sale of $108 million worth of XRP, Chris Larsen, Ripple co-founder and CEO, disclosed a $10 million donation to Harris’s campaign in the presidential race.
“It’s time for the Democrats to have a new approach to tech innovation, including crypto. I believe Kamala Harris will ensure that American technology dominates the world, which is why I’m donating $10M in XRP in support of her.”
– Chris Larsen
It is possible that the recent sale was part of this donation, diluting XRP investors’ holdings in support of Harris. It is notable that despite the Democratic candidate recently joining Trump in the battle for crypto votes, her proposals—like capital gain taxes—are usually seen as a threat to the industry and innovation in the blockchain space.
In closing, balancing operational needs with market impact remains a key focus for Ripple and the XRP community moving forward.
Featured image:
RuskaDesign. Digital Image. Shutterstock.