Recent XRP inflation data suggests that XRP price has underperformed compared to others like Solana and Ethereum due to low demand and not inflation triggered by Ripple sales.
Mr. Huber, a prominent on-chain sleuth, highlighted this in a recent disclosure on X, where he shared data on XRP’s inflation rate since 2015. It bears mentioning that XRP’s inflation solely comes from Ripple’s escrow unlocks and subsequent sales and distribution.
XRP Inflation and Ripple Escrow Unlocks
Notably, Ripple releases 1 billion XRP from its escrow wallet every month instead of unlocking everything into the market at once. According to a December 2017 document, the firm leverages this approach to help maintain stability in the XRP market, as a large-scale dump could damage the market.
At first, Ripple planned to release 1 billion XRP over 55 months starting in 2017. An update on this timeline indicates that Ripple could empty the escrow over the next 42 months. However, this could take longer, as the company often locks back 800 million XRP after each escrow release.
Meanwhile, amid XRP’s recent underperformance in comparison to other notable assets, such as Solana (SOL) and Ethereum (ETH), theories have emerged on the cause of the token’s poor performance. One of these theories points to Ripple’s escrow unlocks.
Some market participants have argued that XRP has performed poorly due to the selling pressure that Ripple’s XRP unlocks trigger. As Ripple unlocks more XRP every month, the practice contributes to the inflation of crypto assets every year.
XRP’s Underperformance Due to Reduced Demand
However, Mr. Huber has dismissed the claims that XRP’s underperformance is a product of this inflation. He shared data comparing the token’s annual inflation rate with Solana’s. XRP’s annual inflation has averaged 6.43% over the past nine years, with last year’s inflation sitting at 6.48%.
Conversely, Ethereum’s inflation rate since 2017 has averaged 3.6%, with a deflationary trend recorded last year due to The Merge and the burns involving transaction fees.
Meanwhile, Solana has an average inflation rate of 16.38% over the last three years, much higher than XRP’s inflation. Notably, Solana has no supply cap. Industry veterans such as Mardeni, CEO of WeaveDB, have claimed the Solana Foundation subsidizes $100 million in transaction fees each month, contributing to the inflation.
Yet, despite Solana’s high inflation rate, the token has outperformed both Ethereum and XRP since last October, when the recent market-wide upsurge began. Solana is up 445% over the past three months. In contrast, XRP has risen by a meager 23.5%, while ETH is up 41%.
Taking these metrics into consideration, Mr. Huber stressed that XRP has not underperformed due to its inflation, but due to a lack of demand. Conversely, Solana has appreciated massively as a result of an impressive surge in demand, which has exceeded its inflation rate.
To add more weight, he called attention to Ethereum’s price action since The Merge. Notably, The Merge has made Ethereum deflationary, but its price action has not reacted more favorably. The Merge occurred in September 2022, but ETH is only up 44% since then. Meanwhile, XRP is up 85% since then.
Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
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