XRP Fair Value Sits at $18,036, Per Discounted Cash Flow Valuation Model  

The true value of XRP may be much higher than its current market price, according to the discounted cash flow market valuation model.

Following the meteoric surge during the 2017/2018 bull run that saw it claim a peak above $3.8, XRP had underperformed relative to the broader market for years. This underperformance spilled into the 2020/2021 bull market, as XRP failed to even reclaim the $2 mark, much less its 2018 all-time high.

XRP Price Under Suppression?

Some commentators attributed this poor performance to suppression from the SEC vs. Ripple lawsuit, which began in December 2020. Others pointed to periodic sales of XRP by Ripple, but the company’s CTO David Schwartz has vehemently debunked these claims.

Now, XRP’s breakthrough occurred last November, when it finally transcended the $0.5 region and recaptured both the $1 and $2 psychological territories. Despite this strong performance, with its price currently trading for $2.34, some market valuation models say XRP’s fair value ought to be much more than this.

Particularly, a valuation using the Discounted Cash Flow (DCF) model suggests its fair market value should be $18,036 per token. It is important to note that this is not a price prediction but an evaluation of what XRP’s worth could be under real-world financial principles. 

The model, built by Silvercliff Partners, applies core banking principles to assess XRP’s potential as a global transactional asset. Notably, Valhil Capital presented this assessment in 2023 as one of multiple models evaluating what XRP’s true value actually is.

Discounted Cash Flow Model Suggests XRP Fair Value is $18,036

For context, the DCF model evaluates XRP’s value by analyzing projected cash flows from global transactions and discounting them to present terms. It assumes XRP will serve as a financial pipeline, processing increasing volumes of global payments over time. 

Interestingly, the analysis uses a base global transaction volume of $104 trillion and applies a 2% economic growth rate. It then factors in a 10% discount rate to indicate investment risks and the time value of money.  

One major assumption from this model is that XRP adoption will grow gradually over ten years, starting at 2% and reaching full adoption at 100% by 2031. 

With these factors, it estimates the total present value of XRP’s transaction volume at $915 trillion. Dividing this by XRP’s circulating supply of 50.7 billion tokens at the time of the assessment results in a fair value estimate of $18,036 per XRP.  

Notably, despite the fair assessment, the DCF model has limitations. It does not account for XRP being removed from circulation as a store of value. However, such a factor could actually reduce available supply and drive prices even higher. In addition, the model’s assumptions around adoption rates and discount factors have uncertainties.