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The true value of $XRP may be much higher than its current market price, according to the discounted cash flow market valuation model.
Following the meteoric surge during the 2017/2018 bull run that saw it claim a peak above $3.8, $XRP had underperformed relative to the broader market for years. This underperformance spilled into the 2020/2021 bull market, as $XRP failed to even reclaim the $2 mark, much less its 2018 all-time high.
$XRP Price Under Suppression?
Some commentators attributed this poor performance to suppression from the SEC vs. Ripple lawsuit, which began in December 2020. Others pointed to periodic sales of $XRP by Ripple, but the company’s CTO David Schwartz has vehemently debunked these claims.
Now, $XRP’s breakthrough occurred last November, when it finally transcended the $0.5 region and recaptured both the $1 and $2 psychological territories. Despite this strong performance, with its price currently trading for $2.34, some market valuation models say $XRP’s fair value ought to be much more than this.
Particularly, a valuation using the Discounted Cash Flow (DCF) model suggests its fair market value should be $18,036 per token. It is important to note that this is not a price prediction but an evaluation of what $XRP’s worth could be under real-world financial principles.
The model, built by Silvercliff Partners, applies core banking principles to assess $XRP’s potential as a global transactional asset. Notably, Valhil Capital presented this assessment in 2023 as one of multiple models evaluating what $XRP’s true value actually is.
Discounted Cash Flow Model Suggests $XRP Fair Value is $18,036
For context, the DCF model evaluates $XRP’s value by analyzing projected cash flows from global transactions and discounting them to present terms. It assumes $XRP will serve as a financial pipeline, processing increasing volumes of global payments over time.
Interestingly, the analysis uses a base global transaction volume of $104 trillion and applies a 2% economic growth rate. It then factors in a 10% discount rate to indicate investment risks and the time value of money.
One major assumption from this model is that $XRP adoption will grow gradually over ten years, starting at 2% and reaching full adoption at 100% by 2031.
With these factors, it estimates the total present value of $XRP’s transaction volume at $915 trillion. Dividing this by $XRP’s circulating supply of 50.7 billion tokens at the time of the assessment results in a fair value estimate of $18,036 per $XRP.
Notably, despite the fair assessment, the DCF model has limitations. It does not account for $XRP being removed from circulation as a store of value. However, such a factor could actually reduce available supply and drive prices even higher. In addition, the model’s assumptions around adoption rates and discount factors have uncertainties.