Deciphering the $334 Ripple (XRP) price prediction – Is it realistic?

There is a lot of excitement around Ripple (XRP) in the moment. With the high rate of Ripple (XRP) adoption at the moment, experts believe that this crypto could emerge as the top crypto in a few years. Of all the many predictions that have been made about Ripple, I have come across one that may look outrageous, but it actually makes mathematical sense. According to this prediction, Ripple will be worth around $334 in around 3 years.
Before you think this valuation doesn’t make sense, let’s break it down, then you will realize that there is a good chance that this analysis may not be as illogical as it might seem at first glance.

First the analysis takes a look at the scope of the market that ripple (XRP) is looking to disrupt. Ripple intends to solve the problem of costs and delays that banks experience in foreign exchange transactions, when using the SWIFT system. This is a 24 trillion market and Ripple can help cut up to 40% of the in this market. Now, given that ripple will make money through transaction fees paid in perpetuity by the banking system, just a slight market share of this market will give Ripple a huge fundamental value boost.

According to the $334 ripple prediction, if Ripple were to get just 10% of this $24 trillion market, and make around 10% in fees, this amounts $334 per XRP when worked backwards, using the net present value method. So is this tenable? The mathematics around this is correct. Actually, based on the same line of thought, one can conclude that Ripple will be worth much more in the future. That’s because Ripple is almost assured to capture way higher than 10% of the global banking industry. In fact, if Ripple can save banks up to 40% in forex costs, no bank would want to be left behind. Getting left behind would mean losing clients to other banks, and that’s a costly mistake that no bank can take.

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Second, the $334 analysis also makes use of the assumption that Ripple will never burn coins. However, in reality, Ripple intends to burn coins per transaction in the long-run. As such, the more banks adopt Ripple, the lower the number of XRP that will be in circulation going into the future. A lower number of Ripple coins when combined with a growing share of a $24 trillion market, will easily see Ripple (XRP) surpass the $334 mark. As a matter of fact, if Ripple were to be adopted by the entire global banking sector, it could lead to a massive coin burn that could easily take Ripple to over $500.

The $334 ripple analyst also argues that once the financial system starts using Ripple enmasse, exchanges too will start stocking up on Ripple, due to surging volumes. This makes sense because as demand increases, exchanges would quite naturally hold more Ripple thus pushing up demand. Ripple would also be added to more exchanges, thereby opening up new demand avenues for Ripple XRP.

We can, therefore, conclude that the idea of $334 Ripple may not be as outrageous as it sounds. Besides, the crypto market is not known for its rationality. We saw projects that have no working products, mere concepts, gain by hundreds of percentages in 2017. There is no reason why something as disruptive as Ripple (XRP) can’t gain by unimaginable margins. However, in the same breadth of crypto irrationality, it is important to invest what you can afford to lose. Don’t lose your shirt!

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Author: Floyd Cook
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