Galaxy Digital founder Mike Novogratz reached out to Twitter to highlight the massive discrepancy between Ripple’s estimated share price and its XRP holdings. “Ripple shares trade at a valuation of $ 2-3 billion in the secondary market,” he wrote. “The XRP on their balance sheet is valued at approximately $ 70 billion. One price seems wrong. “
“When the XRP price says a deal is imminent, the equity is insane cheap. If not, the token seems expensive. Thoughts?”
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Ripple Equity is “traded” in the secondary market with a valuation of $ 2-3 billion. The XRP on their balance sheet is valued at approximately $ 70 billion. One price seems wrong. When the price of $ XRP says a deal is imminent, equity is insane cheap. If not, the token seems expensive. Thoughts?
– Mike Novogratz (@novogratz) April 10, 2021
The answers were a bit mixed. Stephen D. Palley, Associate at Anderson Kill, wrote, “I don’t know how to correlate price myself to a settlement unless someone has inside information about a possible SEC resolution and the ability of the exchanges to re-list yourself for trading. In fact, the outcome of Ripple’s lawsuit with the US Securities and Exchange Commission is not yet known. “In other words, the price might be correlated to a possible settlement, BUT (unless I missed some news) there is no public indication that this will happen anytime soon,” wrote Palley.
Matt Leising, who covers the market structure at Bloomberg, responded with a less positive opinion. “Thoughts? Sure. The correspondent banking system will never switch to Ripple / XRP. They are steam dishes and the SEC will win their case, and XRP will be considered collateral.
Additionally, cryptocurrency researcher Leonidas Hadjiloizou wrote, “Ripple’s XRP sales are under attack by the SEC, so the market has likely not priced in Ripple’s XRP holdings as they are currently pending.”
The vast majority of Ripple’s XRP holdings are in escrow
Regardless of what happens to the SEC, Hadjiloizou also pointed out that: “$ 62 billion of the XRP is held in an escrow account on Ripple’s balance sheet.” As a result, these holdings have most likely not been priced into Ripple’s current valuation.
Ripple released a statement in December 2017 stating that the XRP holdings in Ripple’s escrow account will be “released” in installments of 1 billion XRP (maximum) per month for the next 55 months.
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Well, $ 62 billion of the XRP on Ripple’s balance sheet is held in an escrow account.
At the same time, Ripple’s XRP sales are under attack by the SEC, so the market has likely not priced in Ripple’s XRP holdings as they are currently pending.
– Leonidas Hadjiloizou (@LeoHadjiloizou) April 10, 2021
At the time, the statement stated, “This is a cap on the amount of new XRP that can be circulated. The amount of XRP actually circulated will likely be much less. “
According to CoinTelegraph, Ripple’s equity would be considered “undervalued” if the amount of XRP held by the company were reduced without the XRP price dropping.
Ripple’s entanglement with the SEC may actually add to the XRP price spike
The recent discussion about the discrepancy between Ripple’s valuation and the value of its XRP holdings seems to have been brought into the spotlight by the recent price hikes on XRP. Despite the ongoing lawsuit between Ripple and the SEC, the price of XRP has hit some of its highest points in years.
A number of analysts believe certain decisions in the lawsuit are in fact partially responsible for the rally. For example, the price of XRP rose after it was given access to the SEC’s internal discussions about whether or not XRP was a currency. The court denied the SEC the right to disclose the financial records of Brad Garlinghouse, CEO of Ripple, and another executive member of the company.
At press time, XRP was trading at $ 1.34, 65 percent less than its all-time high of $ 3.84 and nearly 500% more than its January 1, 2020 price of $ 0.23.