The idea of XRP trading at $589 may seem unrealistic at first, but the rationale behind it is not based on a normal cryptocurrency rally. Instead, it is Based on the scenario The XRP Ledger becomes part of the high-value delivery-to-payment settlement in the DTCC/CLS layer, with the altcoin acting as the liquidity asset behind it. Large institutional transactions.
Meanwhile, Under that model, $589 is the level XRP would need to reach to support approximately $73 trillion in annual settlement flows with limited slippage.
Transactions that cannot be minimized
To understand the $589 figure, one must first understand the class of transaction it is designed to accommodate. Also, the $589 XRP calculation starts with the assumption that the XRP Ledger achieves delivery-for-payment certification in a layer similar to the Depository Trust & Clearing Corporation (DTCC) and Continuous Linked Settlement (CLS).
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Under this scenario, the token will be used to Large liabilities that cannot be easily filtered, broken down into smaller parts, or settled through multiple layers. These transactions can range from about $500 million to $10 billion per ticket.
There are many corridors that fall under these transactions, and this model divides them into six corridors. DTCC is allocated a net settlement of approximately $15 trillion at 20%; Cross-border SWIFT settlement of approximately US$21 trillion was allocated with a collection rate of 14%, and net FX derivatives settlement of approximately US$12 trillion was allocated with a collection rate of 12%.
Furthermore, atomic settlement for repo and FICC contracts was allocated approximately $5 trillion at a 10% capture, approximately $9 trillion was allocated at a 33% capture, and stablecoin settlement was allocated approximately $11 trillion at a 33% capture. This amounts to a total of $73 trillion in annual trading volume Through the XRP ledger.
The square root market impact model produces $589 worth of XRP
For XRP to act as a bridge Assets that absorb these flows, It must be deep enough that something like a $2 billion ticket can be settled without moving its price beyond the five slippage points that institutional FX desks treat as standard.
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The $589 figure comes from an inverted version of the law of square root market effect. The model uses a $2 billion ticket size, $73 trillion annual volume, 0.5% volatility, 5 basis points slippage tolerance, 1.36% turnover, and 25 billion XRP liquid float.
Moreover, assuming the flotation of the liquid Except for the included XRP coinOwned XRP ETF, XRP Owned Treasury, and Passive Wallets. Under this setup, the required market capitalization is about $14.7 trillion. Dividing the asking market capitalization by 25 billion liquid XRP, we get an asking price of around $589.
So the calculation is Very different from Simple comparison of market value using the full rolling supply. The current circulating supply of XRP is about 61.82 billion XRP, which is much larger than the 25 billion floating liquids assumed in the model. This means that the $589 outcome depends on only a smaller portion of XRP being available for active settlement liquidity. At the time of writing, XRP is trading at $1.37.
Featured image from Getty Images, chart from Tradingview.com
