Research Firm Alleges Ripple’s Market Cap Is Fake and Overvalued By 46%

By Prashant Jha

Ripple (XRP) is the second largest cryptocurrency as per its market cap, right? Wrong! Or that is what crypto research firm Messari is trying to tell us. Ever since Ripple skyrocketed in late 2018, we have read countless headlines about how Ripple has jostled Ethereum (ETH) out of its snug second spot and despite ETH’s repeated attempts to bounce back, XRP has managed to restore itself to the position. However, now Messari’s report alleges that Ripples market cap may be fake and grossly overvalued.

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Wait what? Well, Messari says that is the case. To back their claim, they explain that Ripple developers misrepresent the circulating supply of XRP, leading to a gross miscalculation, erring by nearly 46 per cent. On most sites that provide information regarding prices, circulating supply and market cap, Ripple’s market cap is shown to be somewhere around $13 billion. In fact, leading data provider Coinmarketcap pegs the value at $13.06 B (data derived at the time of writing this report). Similar statistic providers like Coingecko also give us a similar number.

What went wrong? Messari says that Ripple’s actual circulating supply yields a market cap of $6.9 billion, ahead of 4th position holder Bitcoin Cash (BCH) but significantly behind both Bitcoin and Ethereum, which, in the opinion of Messari, are the legitimate top two cryptocurrencies of the market. The researchers blame the Ripple company that control XRP with a significant degree of implied centralization, for providing inaccurate and misleading informative via its Ripple data API.

Messari says that Ripple does not just hold the 59 billion XRP it admits to hold in escrow. In addition, it is insinuated that the Ripple company has given out billion of XRP to companies and individuals in exchange for deals with the Ripple company itself. Although a few such deals (like the one with the company’s co-founder Jed McCaleb) have been intimated to the public, Messari says many remain under wraps, leading to about 19.2 billion XRP (amounting to $6.1 billion as per its current price) being wrongly added to Ripple’s apparent circulating supply.

The report reads:

“Combined, this means 19.2 billion of the 41.0 billion XRP currently quotes as “in circulation” may be illiquid or subject to significant selling restrictions. In reality, this estimate may prove to be conservative, as they belie XRP trading volumes which have consistently fallen well below that of EOS and Litecoin, two cryptoassets whose current referenced market caps are a mere 17% and 15% of XRP’s, respectively. In addition, we believe the actual amount of “restricted” XRP in distributions to investors, banking partners, and team member may be significantly higher than our initial estimates reflect.”

However, the parent company of XRP has denied the allegation, communicating to a crypto media outlet via private communication channels that:

“Not only does this report contain several inaccurate assumptions around lockups and selling restrictions, the entire report is based on an incorrect calculation of market cap. While decentralized digital assets like XRP are different from traditional equities, the term ‘market cap’ is always a very simple calculation: current price X total number of the asset = market capitalization. That puts XRP’s current market cap at approximately $31 billion. We believe that any other calculation of market capitalization for XRP is not a clear representation of the truth.”

Considered these are serious allegations that Ripple has vehemently denied, will we possibly see any more drama unfold? Even if we must, we would hope the investors are not blatantly misled, whichever party may be correct.