Q4 2019 XRP Markets Report

Fibo Quantum

Ripple publishes the quarterly XRP Markets Report to voluntarily provide transparency and regular updates on the company’s views on the state of the XRP market, including quarterly programmatic and institutional sales updates, relevant XRP-related announcements such as Xpring and RippleNet partnerships and commentary on previous quarter market developments. As an XRP holder, Ripple believes proactive communication is part of being a responsible stakeholder. Moreover, Ripple urges others in the industry to follow its lead to build trust, foster open communication and raise the bar industry-wide. 

XRP Timeline

The decentralized XRP Ledger is the home of XRP, a digital asset built for payments. In June 2012, 100 billion units of XRP were created, with the stipulation that no more XRP will ever be created. Later that year in September 2012, Ripple was founded and was gifted a portion of this XRP. Ripple did not create XRP. The available XRP supply decreases over time as fractional amounts are burned—destroyed—to pay transaction costs. 

Since the creation of the XRP Ledger, the number of closed ledgers has exceeded 51 million (as of December 31, 2019), with over 150 known validators participating on the network. The diversity of these validator nodes further guarantees fairness and neutrality on the XRP Ledger. No single entity can decide which transactions succeed or fail, and no single entity can alter a transaction after it is added to the Ledger. As a result, no transaction submitted to the XRP Ledger has ever been discriminated against or censored—unlike some proof-of-work systems, where small groups of miners control over 51% of the hashing power, and could potentially reverse transactions.

Disciplined, Responsible Stakeholders: Continued Pause in XRP Sales 

As readers may recall, in Q2 2019, Ripple shifted to a more conservative volume benchmark for XRP sales, away from CoinMarketCap and to CryptoCompare Top Tier (CCTT) and significantly reduced XRP sales. In Q3 2019, Ripple further reduced XRP sales and paused programmatic sales. Ripple maintained this approach throughout the entirety of Q4. However, obtaining publicly available sources of trusted trading volume remains to be an ongoing challenge. There is still much progress to be made, and Ripple will continue to evaluate its benchmarks and work proactively with industry participants toward addressing the persistence of fake volumes in industry volume data.   

Last quarter, total XRP sales were $13.08 million (USD) vs. $66.24 million the previous quarter. In addition, Ripple continued the pause of programmatic sales, focusing solely on our over-the-counter (OTC) sales with a few strategic partners, who are building XRP utility and liquidity in strategic regions including EMEA and Asia. Total sales (OTC-only, given programmatic pause) ended the quarter at 8bps of CCTT—this is compared to total sales in the previous quarter (OTC + programmatic) of 36bps of CCTT, representing a 78% drop QoQ. 

Sales Summary (dollars in millions) Q3 2019 Q4 2019
Institutional direct sales (OTC) 50.12 13.08
Programmatic sales 16.12 0
Total sales 66.24 13.08
Global XRP volume Q3 2019 Q4 2019
ADV XRP (dollars in millions) 198.10 187.34
Total XRP volume (dollars in billions) 18.23 17.24
Total sales as % of total volume 0.4% 0.08%*

* Percentage is calculated by dividing actual Ripple dollar proceeds by total reported XRP volume in dollars.

Note: In Q4, CCTT changed the methodology it uses to determine which exchanges it lists in the TopTier, which is reflected in the numbers above. Ripple continues to evaluate its benchmarks given challenges, such as fake volume, that continue to persist in the industry.

Reported Volume

CCTT’s reported daily volume for XRP decreased in Q4 from Q3 2019. The average daily volume was reported at $187.34 million in Q4 versus $198.10 million in Q3, and below Q2’s reported $429.51 average daily volume.

Volatility

Based on CCTT’s closing price of XRP, XRP’s volatility of daily returns over Q4 was 3.1%, a drop in volatility from Q3’s 3.6%. XRP’s volatility over the quarter was similar to that of BTC (3.0%), and that of ETH (3.1%).

Escrow

Q4 Activity 

In Q4 2019, three billion XRP were again released out of escrow (one billion each month). Of note, in December of this quarter, Ripple returned a full one billion back to escrow, for the first time ever. In total across the quarter, 2.7 billion XRP were returned and subsequently put into new escrow contracts. Note: All figures are reported based on transactions executed during the quarter.

History of Escrow

Last quarter, Ripple saw an increase in public commentary around the release of XRP from escrow at the end of each month. To provide context and clear up misinformation, as of December 31, 2019, Ripple has 49.9B XRP locked in a series of escrows (excluding this amount, Ripple holds approximately 13% of the outstanding XRP) and these escrows are on the XRP Ledger. The Ledger mechanics, enforced by consensus, control the release of the XRP. 

Every month, the escrow releases a total of one billion XRP to Ripple. The portion of XRP leftover each month is placed into a new escrow to be released in the following months. For more information on Ripple’s escrow, please see here.

On-Demand Liquidity (ODL)

In November 2019, Ripple announced that over two dozen companies have become customers of ODL, including MoneyGram, goLance, Viamericas, FlashFX and Interbank Peru. In addition to the USD-MXN and USD-PHP ODL corridors, the company went into production with ODL payments originating from Australia into USD and PHP, and a new production ODL corridor from EUR-USD. Plans for additional corridors across APAC, EMEA and LATAM are in progress for 2020.

In 2019, dollar value transacted through ODL increased more than a hundred times between Q1 and Q4, and specifically from Q3 to Q4, by 550%. The number of ODL transactions also increased by 290% from Q3 to Q4, showcasing high customer demand for leveraging digital assets, specifically XRP, in cross-border transactions.

In addition, Ripple made an investment in Bitso, the largest exchange in Mexico, to support RippleNet’s US-MXN corridor by providing critical liquidity for payments. Last year, Ripple launched ODL capabilities with MoneyGram into Mexico, with Bitso as the key exchange partner. MoneyGram has publicly reported that they have moved more than 10% of its transaction volume between the United States and Mexico through ODL.

Xpring

Xpring, the open platform for money, continued to make it easier for developers to build on the XRP Ledger and leverage Interledger Protocol (ILP) to realize the Internet of Value through tools, services and programs. Last quarter, Ripple acquired Strata Labs to join Xpring and focus on building ILP infrastructure, making the ILP network more accessible to developers. 

Other notable traction and news from Q4 include:

  • The launch of xpring.io, a new website that will serve as a central hub for developers to manage everything they need to integrate payments into their applications.
  • Xpring’s investment in BRD, one of the oldest crypto wallets in the industry. BRD will build on Xpring to support and integrate XRP into the BRD wallet.
  • Xpring’s investment in Towo Labs, which develops open-source software for full support of XRP on hardware wallets. 

New Liquidity Partnerships

Derivatives Market

Derivatives trading in digital assets recorded remarkable growth in 2019. XRP derivatives may further develop in 2020, amid a continuous general crypto derivative boom that is set to outpace spot volume by multiples. 

To date, XRP derivatives have become available on several exchanges such as Binance, Huobi, OkeX, AAX and FTX. Moreover, XRP derivatives are a potentially important tool in order to manage exposures and transactions through Ripple’s cross-border payment solutions, where XRP is leveraged.

The introduction of derivatives, widely accessible in more mature markets for traditional assets, is an important step in the maturation of digital assets, as they help to improve the efficiency, liquidity and robustness of markets

Borrowing and Lending

The digital asset borrowing/lending market saw substantial momentum throughout the past year as this market is now considered a $5 billion industry. XRP has become available on many of the largest platforms in crypto lending including Genesis, Celsius, Nexo and SALT. 

The momentum has been fueled by several factors: low interest rates in many fiat currencies, a growing number of digital asset market participants seeking working capital, and an increasing number of long-term digital asset holders looking to generate yield. While concerns over a “crypto credit bubble” have started to emerge, the growth potential for this market remains substantial into this year and beyond.

Market Commentary

Market Moves

  • Mining groups in China control 66% of the bitcoin hashrate, according to a report by Coinshares. This is the highest recorded percentage controlled by China since Coinshares started tracking hashrate in the past two years.
  • Chinese President Xi Jinping called for more support and investment in blockchain technology. Weeks later, China’s central bank ordered crypto firms to halt operations and warned investors against digital currencies. 
  • Bitcoin slumped to a six-month low in November after China’s restrictions and latest crackdown of crypto firms.  
  • Bitmain and Canaan filed for their respective IPOs.
  • Kraken continued its acquisition spree by acquiring Australian based exchange Bit Trade. 

Regulatory Activity

  • CFTC Chairman Heath Tarbert said in an interview that increased use of derivatives involving digital assets could help the industry mature. This is on the heels of CME launching its BTC options contract, which saw greater volume traded on day one than that of rival ICE’s Bakkt contract.
  • SEC issued an Investor Alert to urge investors to use caution before investing in so-called “initial exchange offerings” or IEOs through trading platforms. 
  • Former CFTC Chairman J. Christopher Giancarlo announced the launch of a non-profit organization to develop a U.S.-backed “digital dollar” project with consulting firm Accenture.

Industry Player News

  • JPMorgan and MAS announced the next phase of project Ubin for cross-border interbank payments.
  • Facebook co-founder and CEO Mark Zuckerberg testified before the House Financial Services Committee about the company’s Libra whitepaper.
  • Ant Financial partnered with Finablr to enable remittances for AliPay users. Ant Financial also raised $1B for another investment fund for later stage fintech investments as it expands its global presence. 
  • TransferWise will allow payments to some of the biggest e-wallets in APAC including GoPay (GoJek), OVO, DANA, GCash, PayMaya and bKash. TransferWise also struck a partnership with GoCardless for recurring cross-border payments.

The report was updated on January 23, 2020 with certain corrected figures for the ODL metrics.