Analyst Review of Ripple XRP
Transcript of Video:
Hi, this is Roger, from the Digital Currency Index, and today we are doing an analyst’s review of Ripple XRP. Now, if this is your first time watching one of these videos, somewhere to the left, right, bottom, above, is a link to our actual analyst’s review. I’d recommend clicking on that, and pulling up the data that we’re about to cover. Doesn’t take an email. You can completely read it on your own, but it’ll be good to follow along, more so than watching my ugly mug on the video.
So let’s go ahead and jump in. So the XRP was founded, Ripple was founded in 2013. It really came to light at the beginning of 2017, as it started to release its new white paper, started to do some big transactions with major banks. And then we saw a huge increase in the overall coin value.
When you look at our scoring methodology, you’re going to see that there’s a max score potential, and that there’s the actual score that we give it for that specific qualitative, or quantitative metric. So, on age, as it’s more than a year old, we’re going to give it a perfect score, five out of five.
We’re going to come down the sheet, a little bit, and we’re going to look at its website. Now, I have the website up behind me. I really don’t give a flying fuck if it looks good. What I’m worried about is, is the information on it good? And, really, the Ripple website is very detail oriented. It’s going to tell you about its team, its partners, its projects, how the XRP token works, it’s really, really thorough. So, because of that, we’re going to give the website a perfect score, which is two out of two.
Now, we’re doing a 100 point metric on all of these tokens that we do, coins and tokens that we do analyst’s reviews on. So, when you look at the website, it’s only two percent of the overall score. We don’t weigh that very heavy. But what we do have heavy weight on, is when we come down into the white paper. You’re going to see a link to their white paper on our analyst’s review sheet, and their white paper is very meticulous. It’s going to tell you everything that you need to know about this project, both from an advanced, and a basic perspective, and it’s really going to give you a thorough vision of where they’re going with this, and why they believe that you should invest your resources in working with them.
I do want to differentiate, as we go through this, the difference between trading and investing. We’re going to say that investing is a buy and hold strategy of more than one year, which is the perspective, which we take, with our analyst’s review. If you’re looking at the charts of XRP, and you’re looking at it peaking at 38 cents, and then falling down to 18 cents, and you wonder if it’s going to get back to 26, that’s not what we’re going to help you do, in this video, although we will give you some bullet points about things that could influence price over the next quarter, down towards the end.
So we’re going to score their white paper a perfect 10 out of 10. Now, the most points that we give to any individual element is 10 points, or 10 percent of our overall scoring method. So that’s showing you how important the white paper is. The next thing that we’re going to drop down to is in their community. Where is their main community? How many people are in their community? And what’s the quality of their community?
Community is important in this decentralized world, because all of the communication is being done in kind of a public, open forum perspective. Either on Reddit, or Facebook groups, or Telegram, a lot of different places. We’re going to find the primary conversation for Ripple going on on Reddit. It’s got a huge number of community members. But, most importantly, it’s well managed. There’s engagement from the development team, there’s engagement from the corporate team. They’re really taking the time to make sure that the community is aware of what’s going on, and are able to follow along with the project. So we’re going to score them perfect on the number of people in their community, and the quality of the community.
The next qualitative metric that we’re going to look at is the quality of their team. You’re going to see a link, there. There really is not a better team out there, in this space. You’re going to see some of the brightest minds, from cryptographers, to developers, to systems engineers, to business development, and corporate management, legal, it’s all there. Take a look at their website, it’s really impressive, the individuals they brought together on this team, so we’re going to score them a perfect six out of six.
The next one we’re going to drop down into is the number of exchanges that it’s listed on. We’re going to give them a perfect score. They’re listed on all major exchanges. One of the questions that we get is, “But they’re not on Coinbase,” well Coinbase is not an exchange, they’re a commodities broker. Look at the way that their regulatory filings are done. That’s why you only see a limited number of coins on them.
So you can basically buy, sell, trade XRP just about anywhere. Market cap, they’ve rounded, around a seven billion dollar market cap. That puts them in the top 10 percent, which is going to get them a perfect score in market cap, as well.
We’re going to start to drop into some more intense qualitative metrics, and we’re actually going to start to get some negative attributes to XRP’s potential for long term investment. And really, what that comes around to, is that the owners currently hold 60 percent of the tokens. That’s not great. There’s a lot of talk out there, that’s one of the biggest elements of negative sentiment against this project, on the market right now. There had been talks about a lock up. That, then, gave way to a talk of a distribution process, over the next five years, that every month, they’re going to roll out a small bid, until they’re completely market liquid. But of course that means it’s going to keep the market saturated.
So, on this, we give percent held by founders a five percent bearing on our overall score, and they’re going to get a one. That’s really the first negative score that you’re going to see, for XRP. You’re going to see a couple more, as we finish this off.
Are they associated with illegal activity? It’s a qualitative metric. Right now, there’s not a lot of exposure in that, because of the way that the token is being, the coin is being used, I apologize. So we’re going to give them a perfect score, five out of five. The example would be that, maybe with Bitcoin, you’re going to see some negative attribution there, because it’s associated with the dark web. You’re not seeing that, as much, with XRP.
Potential impact from regulation. Now, this, when we talk about regulation, we’re talking industry specific to the space that they address. Their business is around blockchain technology for transactions of contracts, financial transactions. We’re not going to articulate industry wide regulation, that could have a negative effect on the overall cryptocurrency space. So we’re going to score them a perfect five out of five, because they’re already working with some of the world’s largest banks, and they looked at the right regulatory framework setup. And if regulation came down that affected the overall cryptocurrency space negatively, they are properly positioned to take whatever steps are necessary to get into proper filing. Not saying that they would need to. They may already be set up exactly how they need to stay, so they’re going to score perfect there.
Now, the same thing with the percent held by founders. We’re talking about available supply, to total supply. There’s 100 billion Ripple coins available, with only about 40 billion of them being traded on the market. Again, that’s a huge negative. We separate the difference between owner held, and overall float, because there could be a float in a coin that’s not owner held, so we have to differentiate those. So they’re going to score a four out of 10 there, which, of course, is going to bring down their overall rating.
Next is the hold value prop, and I’m also going to talk about the underlying asset association. There’s a lot of talk today, in the cryptocurrency space, about how 90 to 99 percent of alt coins are pure shit. And I’m not arguing with that fact, in fact, I believe that that’s true. So when you look at, does the token, or the coin have underlying assets, you need to understand what its value prop is, beyond just an exchange rate on the open market. In XRP’s case, every transaction that takes place on their network requires 10 drops. A drop is one one-millionth of an XRP coin. So that means that, in order for these financial institutions to do transactions on the Ripple network, they are going to have to hold XRP coins. So that means that it does have some underlying value to it.
Now, if you do the math on it, there’s 100 billion coins, and it takes one one-millionth of a coin, in order to process a transaction, it would take about 1,000 years for XRP to be burnt up, if it did 100,000 transactions per day. Take that for what it’s worth. I think those numbers are really big. But, long term thinking, 1,000 years from now, we’re probably going to have a little bit different technology. But we are going to give them a hold value prop of five out of four, because there is value there. That small ding is the fact that there’s so much of it out there, that it creates a problem. And then also a five out of four in underlying asset association. As Ripple Labs grows their business, it should create increased demand for XRP coins, which, therefore, should keep an underlying value to the overall coin, beyond just its exchange traded rate.
Competition. Ripple’s going to score a 10 out of eight, only because, excuse me, there’s a lot of competitors in the blockchain realm, right now. They are a leader, but bitcoin was once a leader. Bitcoin’s got a different value prop, now, and Ripple’s done a great job of positioning themselves properly, to be a fraction of the amount of time that it takes bitcoin to do a transaction, and a fraction of a lot of the other coins, but that doesn’t mean that another one’s not going to come out tomorrow that’s 10 times, 100 times, or to a millionth degree times faster than what’s already out there. So we’re going to give them a 10 out of eight, because they’ve got current traction, there.
Again, all of our analyst’s ratings are done on a quarterly basis, so these numbers are going to update, next quarter. Sentiment score. You’re going to see that it got a 10 out of five, and that’s going to go back to something that I said previously. There is some negative sentiment out there, against this coin, because of the founder’s hold on the overall circulation of the coin. Once they solve that problem, and the industry accepts their solution, and the price readjusted at, you should see positive sentiment start to increase overall for them, because of the deals that they’re making and the organizations that they’re working with.
Problem they’re attempting to solve value. Are they a disruptor. We gave them a five out of five on this. We’re starting to see, in the news, the first home was sold for bitcoin. The first title transfer for a property was done on blockchain. This is the direction that we’re going. It’s not about buying the XRP because it’s going to go from 18 cents to 19 cents, in the next year. It’s about this being a disruptive technology, that’s going to change the way that we do transactions, across the board. Financial, real estate, automobiles, everything. Ripple is an industry leader in that, right now, and every quarter, we’ll reevaluate if they’re holding that position.
Overall, we’re going to score Ripple an 81 out of 100, which is going to put it in the hold category. If you own the coin, I would hold it. I wouldn’t be liquidating because of anything that’s going to be happening negative, to this coin. Again, not talking about overall industry regulation that could affect pricing fluctuations. But it didn’t necessarily score high enough for us to put a buy rating on it. So as you’re looking at your allocation, inside of your holdings, definitely be holding some XRP, but there’s other coins out there that you might be able to get bigger, longterm value props from, until Ripple takes care of a couple of the problems that they’re facing.
So, I’m Roger, from the Digital Currency Index. That was our quarterly analyst’s review for Q4, 2017, October 2017, for Ripple Labs XRP. If you have any questions or comments, feel free to leave them below, or anyplace on the page that you’re seeing this video, and we’d be happy to talk to you about it. Thank you.