Will Ripple's Low XRP Price Force It to Sell Off Holdings? Insights from an Executive

In recent weeks, the drop in XRP's value has raised concerns among holders about whether Ripple might be compelled to sell off more of its XRP reserves to ensure its operations continue. This anxiety has grown alongside discussions about Ripple’s evolving business model, particularly with the introduction of the company’s RLUSD stablecoin.

Key Takeaways

Ripple’s falling XRP price has raised concerns about potential token sales to maintain operations.
CTO David Schwartz clarified that decreasing XRP prices do not pressure the company to sell off its holdings.
Ripple has a diversified revenue model that reduces reliance on XRP sales.
The escrow program helps manage XRP’s circulating supply and minimizes market impact.
Exploring new income sources is crucial for Ripple, especially given the current XRP price scenario.

XRP

The conversation took place on the social media platform X, where Ripple’s Chief Technology Officer, David Schwartz, addressed whether a lower XRP price might necessitate more token sales from Ripple.

Ripple's CTO: Falling Prices Don’t Necessitate Token Sales

Schwartz responded to a user’s concern that Ripple might gradually shift its focus away from XRP due to the RLUSD being backed by fiat reserves, in contrast to the cryptocurrency. The user's point suggested that this difference could make Ripple less sensitive to fluctuations in XRP's price and more reliant on the stablecoin during uncertain market periods.

This situation could imply that Ripple might become less engaged with XRP’s market dynamics, thus losing some incentive to support the cryptocurrency if its price continues to drop. However, Schwartz firmly disagreed with this perspective. He clarified that the notion of decreasing prices increasing the pressure to sell off XRP is inaccurate. He noted that Ripple’s income model now provides the company with the stability to operate independently of market fluctuations.

In Schwartz's view, diversified income streams significantly reduce the likelihood that Ripple would find itself in a position where it needs to sell XRP to keep its operations going.

The Importance of Diversification for Ripple

Concerns regarding Ripple’s potential XRP sales stem from its existing business model. Historically, a significant portion of Ripple’s income has originated from controlled XRP sales, alongside its enterprise solutions like cross-border payment services through RippleNet.

However, previous public reports indicated that software licensing fees and other enterprise offerings generated revenue that paled in comparison to that derived from XRP sales. As a result, there are worries that aggressive selling during market downturns could negatively impact XRP’s price.

An essential element of Ripple’s token management strategy includes an escrow program that releases 1 billion XRP tokens every month on a set schedule. This system was designed to create predictability in XRP's circulating supply and to avoid sudden, large influxes into the market.

Typically, Ripple reinvests most of the unlocked XRP (around 70% to 80%) back into escrow each month, only releasing a small portion for operational use. This approach limits Ripple's impact on overall market liquidity.

Despite the current dependency on XRP sales, there is an urgent need for Ripple to explore additional revenue sources. Schwartz's statements indicate that the company is not in a position where it must hurriedly sell off XRP, despite the token recently trading at lower levels.

XRP price chart from Tradingview.com Price continues to trend low | Source: XRPUSDT on Tradingview.com