How Ripple’s XRP Holdings Could Grow by an Additional $20B

Ripple could potentially boost the value of its $XRP holdings by $20 billion, based on a market strategy proposed by Patrick L. Riley.

Riley suggests Ripple’s $XRP holding and substantial cash position could allow a $1 billion buy to lift prices by $0.50, adding $20 billion in value. He compared this to Michael Saylor’s Bitcoin strategy, but an extensive assessment reveals holes in his theory.

Key Points

Ripple is witnessing renewed criticisms over its extensive $XRP holdings after recently moving 75 million tokens.

According to Riley, Ripple holds 39 billion $XRP and about $5 billion in cash, and the firm could leverage this to grow its financial standing.

Riley claims a $1 billion buy could raise $XRP by $0.50, adding $20 billion to Ripple’s total balance.

The expected price impact may not play out due to factors like slippage and liquidity changes.

Also, sustaining gains remains uncertain, with reflexivity risks if the $XRP price declines after leverage.

The $1 Billion $XRP Buy Thesis

Riley, an American veteran, discussed this in a recent commentary amid renewed criticisms surrounding Ripple’s large $XRP $XRP holdings, particularly after the company moved 75 million $XRP in a recent transfer, sending 50 million tokens to Coinbase.

The market commentator argued that Ripple’s position is actually a major balance sheet opportunity that the firm could leverage. According to him, Ripple holds about 39 billion $XRP and about $5 billion in cash, and this gives it enough resources to move the needle on its own financial standing.

Riley claims that if Ripple spent $1 billion buying up the lowest available $XRP liquidity in the market, it would push the price up by roughly $0.50. He argues that this price increase would add about $20 billion in value to Ripple’s nearly 40 billion $XRP holdings.

The veteran further suggested that Ripple could then borrow against the newly appreciated value of its holdings and use the collateral to push its financial position higher. “That is the purpose of Evernode,” he added.

Riley compared this to what Michael Saylor does with Bitcoin at Strategy. He clarified that his point is mostly about Ripple acting in its own corporate interest, the same way Saylor does with Bitcoin. As a result of this possibility, Riley believes Ripple’s extensive $XRP holdings could be bullish for the $XRP market.

Important Caveats to Note

While Riley’s theory sounds bullish on paper, some parts of the analysis have some shortcomings. His claim that a $1 billion purchase would produce a neat $0.50 price move suggests that the market stands still, which may not hold up in practice.

Notably, markets respond to large orders in real time, as algorithmic traders, market makers, and other market participants quickly change their positions. This means sell walls can move higher, and thin liquidity can disappear before a large order even finishes filling. The actual capital necessary to achieve that projected price move could turn out to be much more than $1 billion.

Meanwhile, there is also the issue of slippage, where a large buy order gets filled at progressively worse prices as it works through available liquidity. At the scale Riley describes, there could be a large gap between the expected price and the actual average fill price.

Also, even if the $0.50 $XRP move happened, holding that price level would require sustained buying pressure. Notably, profit-takers and short sellers typically respond quickly to sharp price spikes, which means the market could erase the paper gain on Ripple’s holdings if there’s no continued capital commitment.