XRP Fair Valuation Calculator Puts XRP at $7 on $30B Volume

The XRP Athey and Mitchnick calculator, which seeks to calculate XRP’s fair valuation, has put the crypto asset’s price at $7.57 on a $30 billion trading volume in a year’s time.

XRP looks to revolutionize the cross-border payments scene due to its role in Ripple’s ODL (now Ripple Payments) product. As a result of its potential and utility, several industry commentators believe the asset is largely undervalued.

Some of these pundits have pointed to the SEC’s lawsuit, which began in December 2020, as one of the major factors being XRP’s price suppression.

Notably, the asset was unable to leverage the market-wide bull run of 2021 which saw multiple tokens, including Bitcoin (BTC), hit new all-time highs.

Amid the speculation regarding XRP’s value, Susan Athey and Robert Mitchnick, researchers at Stanford University, introduced a framework for valuation of crypto assets based on certain metrics, including their utility and other economic factors.

In 2018, they released a paper presenting a formula that gauges the intrinsic value of XRP, considering factors such as transaction volume, store of value, and supply.

Utilizing this model, Unbanked Freedom, a platform committed to advancing financial inclusion, developed an online calculator.

The calculator allows users to input their own assumptions and parameters and see how they affect the value of XRP. The Crypto Basic recently leveraged the calculator to gain insights into XRP’s projected fair market value based on certain factors.

XRP Metrics Considered

The first metric is the daily XRP transaction volume. This refers to the money flowing through XRP every day. We assumed a $30 billion volume.

This assumption is realistic, seeing that XRP’s largest 24-hour volume is $36.95 billion. The asset achieved this feat in April 2021 while trading above the $1 price threshold.

Secondly, we considered the time between each XRP transaction, which highlights the average days an XRP sits idle before the next use. For this metric, The Crypto Basic assumed a 5-day interval, representing the default value.

We then turned to XRP’s store of value, representing funds held in the asset. For this scenario, we set up a $300 billion valuation. Notably, this figure is only 10 times XRP’s current market cap, putting it in the realm of possibilities. 

The calculator allows participants to insert the duration they believe XRP could reach the assumed metrics, especially the projected transaction volume. In this case, we put up a 1-year period, reflecting an optimistic but plausible projection.

The circulating supply for the 1-year duration was also considered. Notably, XRP currently has a circulating supply of 54.2 billion tokens at the time of reporting, per CoinMarketCap data. 

Considering Ripple retains 200 million tokens out of the 1 billion released monthly, the supply will increase by 2.4 billion tokens in 12 months. This translates to a circulating supply of 56.6 billion tokens in the next one year. 

We also analyzed the discount interest rate for XRP. This metric calculates the annual discount interest rate used to calculate present XRP value. We assumed a 5% rate, the default value, and a sensible measure for risk-free investments.

XRP at $7.57

Based on the provided parameters, the calculator estimates XRP’s value to be $7.57. Notably, XRP currently trades for $0.5641 amid a 1.86% 24-hour drop. For the token to reach $7.57, it would need to appreciate 1,241% from its current value.