XRPs supply mechanism is one of the most controversial talking points in the crypto market. XRP exchange reserves have been declining for months and the on-chain numbers are striking. Now, a crypto expert at
The XRP supply shock could push exchanges into a liquidity crisis
A crypto expert known as DelCrxpto added one An interesting angle for a scenario where demand for XRP overwhelms available exchange supply and forces a new liquidity structure around Ripple’s XRP reserves. When demand increases faster than available supply, the price must be adjusted. XRP could eventually reach a point where exchanges struggle to obtain enough spot supply to meet demand from buyers, institutions and liquidity providers.
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The expert predicted that the exchanges will eventually no longer has an XRP supply, Demand will explode and the entire XRP supply ecosystem could even be at risk of freezing. However, he believes that such pressure will not only affect the price, but also force the market to do so create new liquidity channels from derivative contracts.
Interestingly, the expert also predicted that Ripple will intervene by deploying it parts of its XRP reserve as a liquidity pool and issuing XRP derivative contracts to exchanges. These exchanges would then sell the contracts at the market price, allowing Ripple to generate returns from the structure.
What’s going on with the offer?
The current supply of XRP shows why the idea of exchanges running out of XRP should be handled carefully. At the time of writing, CoinMarketCap estimates the circulating supply of XRP at approximately 61.82 billion XRP. The key question, however, is not how much XRP is in circulation, but how much of that supply is actually liquid and available for immediate sale on exchanges.
Recent on-chain data is starting to strengthen the argument that XRP’s liquid supply may be tightening. For example, the amount of XRP held on Binance has reportedly increased cases of approx 3.05 billion tokens to under 2.75 billion in less than a year, leaving the exchange’s XRP reserves near multi-year lows.
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The drop in XRP wallet balance also coincided with a rise in the number of XRP holders. Wallet addresses with at least 10,000 XRP do reached a new all-time record of 332,000 wallets, showing that larger holders are still building positions despite XRP’s volatile price action.
Another important signal comes from the whale exchange activities. Data has shown that the largest holders of XRP have slowed the rate at which they send tokens to crypto exchanges. The 30-day cumulative whale influx indicator has fallen downstairs 736 million XRP, the lowest level since November 2021.
Featured image created with Dall.E, chart from Tradingview.com