Research: A majority of XRP investors are “deeply in the red” after 90% crash 🚨 This article is 5 years old...
Research: A majority of XRP investors are “deeply in the red” after 90% crash
3 min read
Updated: Jun. 18, 2020 at 9:39 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
It would be a stretch to say that XRP has performed well over the past few years.
From its all-time high price around $3.40, the fourth-largest cryptocurrency has collapsed by more than 90 percent, with the retracement even being deeper at times. At the current price of $0.19, the altcoin is down nearly 95 percent from the peak of 2018’s crypto-mania.
Due to the dismal performance of XRP, there have been suspicions that most of the cryptocurrency’s holders have “heavy bags” — that’s to say, most are unprofitable on their XRP investment.
A recent analysis by a researcher at Messari, a cryptocurrency data startup, confirmed the sentiment.
It cost the average XRP holder $1.38 to accumulate each coin: research
The most common metric to track the aggregate value of a cryptocurrency is the market capitalization — the total value of coins in circulation multiplied by the market cost of each coin.
Yet many see the metric as flawed; many of a cryptocurrency’s coins may be lost, some cryptocurrencies are extremely illiquid with very thin order books, projects may “print” millions of extra coins to have an illusion of a high market cap, and much more.
Many say that a better way to measure a cryptocurrency’s success is through its realized capitalization. Messari’s Ryan Watkins recently explained that realized capitalization “can be thought of as an estimation of the aggregate cost basis of a cryptoasset.”
The realized capitalization of a cryptocurrency is calculated by adding together the value of each coin at the price it was moved on their respective blockchain.
Messari’s data indicates that XRP’s realized capitalization is about $43 billion, which suggests that the average holder accumulated their coins at $1.38 each. This means that most investors in the altcoin are in the red:
“Despite XRP having only closed above $1.00 on just 2.1% of its trading days, the cryptocurrency’s aggregate estimated cost basis is $1.38. This suggests most XRP investors are deeply in the red,” Watkins explained on the state of the asset’s investors.
The start of a bigger move lower
Although a majority of XRP holders are already in the red, the cryptocurrency is expected to slide lower in the months and years ahead.
On Jun. 10, a multi-decade commodity trader and Bitcoin bull Peter Brandt speculated that XRP could crash upwards of 90 percent against Bitcoin. The brutal prediction was triggered by the altcoin sliding below a crucial support level, which has held multiple occasions over the past few months and over the asset’s history.
He’s ventured as far as to say that the cryptocurrency is valued close to zero and is thus currently overvalued.
In May, Brandt wrote that while “wannabes accuse” him of simply “being a hater” of XRP, he’s anything but that.
“In 45 years as a career market speculator, I’ve come to discern the real deals from the possible scams I’ve only attempted to warn people that $XRP is a manipulated market & a dead end,” the trader wrote.
Brandt’s foremost gripe with XRP seems to be its relatively high rate of inflation.
Another Messari researcher found in May that XRP’s circulating supply has grown at a rate of 20 percent per annum, five times higher than that of Bitcoin pre halving and ten times that of BTC post halving.
The researcher who shared this data strongly implied that the high inflation rate is why XRP is trending lower compared to other altcoins and Bitcoin. He indicated this sentiment when he wrote.
“Only 30% of XRP max supply has been distributed, vs 87.5% for BTC. BTC is up 20% since last year, XRP is down 47%.”
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The XRP Ledger is a decentralized cryptographic ledger powered by a network of peer-to-peer servers.
Messari
Messari is a fast growth startup in New York that is building the next generation data layer for the global cryptoasset community.
Peter Brandt entered the commodity trading business in 1976 with ContiCommodity Services, a division of Continental Grain Company.