According to data published by Messari, the inflation rate of XRP has jumped to almost 20%.
The thing is that although all 100 billion XRP tokens have already been created, there is only a part of them in circulation. At this moment, for example, according to CoinMarketCap, there would be 44 billion tokens in circulation, just under 45% of the total.
The others are held by Ripple and are released over time, although at a decidedly fast pace.
Ripple’s price is not incentivized by inflation
The continuous release of this large amount of XRP put on the market directly by Ripple, causes its circulating money supply to suffer significant inflation.
Currently, XRP inflation would be almost 20%, more than five times that of BTC (3.7%), and more than four times that of ETH (4.7%).
It is, therefore, no coincidence that the market price of XRP is struggling to grow. For instance, when taking 2020 as a reference, XRP began at just under $0.20 and then peaked at an annual high of $0.33 in mid-February. However, with the collapse in mid-March, the price plummeted to $0.13 and then rose to its current level of $0.20. In other words, the price has not changed much since the start of the year.
BTC, on the other hand, started the year just above $7,000 and then peaked at almost $10,500, plunging below $4,500 and then recovering to around $9,500 today.
In other words, during the first months of 2020, the price of bitcoin rose more than 30%.
Messari researcher Florent Moulin commented on Twitter:
“XRP circ supply inflation rate (20%) is the highest among large-cap assets over the past year, 5 times higher than BTC pre-halving.
Only 30% of XRP max supply has been distributed, vs 87.5% for BTC
BTC is up 20% since last year, XRP is down 47%”.
For as long as the actual inflation rate of XRP’s circulating supply remains so high, it is really hard to imagine that the price could rise significantly and steadily, especially at a time when BTC’s circulating supply growth rate has recently been halved.
Besides, so far there is nothing to suggest that this inflation rate will actually decrease, mainly due to Ripple’s continued sales of XRP on the market.
Moreover, considering the use of XRP by Ripple itself, within its financial instruments created mainly to facilitate trading, a limited volatility of its value is an advantage. Therefore, it is unlikely that the company would decide to stop selling XRP on the market.