Last week, Ripple
$3executed an automatic release of XRP tokens worth $3.28 billion, sparking concerns about potential sales pressure in the markets. However, observers emphasize these fears are unfounded as most of the released XRP was quickly returned to the escrow account.
Understanding the Ripple Escrow System
Ripple has been utilizing an automatic escrow mechanism to stabilize the XRP supply in recent years. Despite partial losses in legal disputes with the U.S. Securities and Exchange Commission (SEC), some of Ripple’s significant claims have been acknowledged by the SEC. While this led to a brief rise in XRP prices, the focal point remains Ripple’s substantial XRP release.
Market participants perceived this move as a potential long-term pressure on XRP’s price. Experts clarified that such releases typically occur automatically as per a set schedule. Attorney and cryptocurrency analyst Bill Morgan reminded followers on Twitter that Ripple’s CEO Brad Garlinghouse highlighted the benefits of the escrow model years ago.
Garlinghouse explained eight years ago that the escrow system ensured predictable supply and secure XRP markets. Today, although there are dissenters, numerous instances demonstrate the release of XRP from escrow does not negatively affect the price.
Price Pressure and Investment Strategies in XRP
The escrow system, endorsed years prior by Ripple’s CEO, aims for predictable supply and stable markets for the company. This approach is noted for its past positive reception from the SEC. Holding tokens in escrow provides an extra supply-side guarantee against potential market fluctuations.
Abandoning this system, when well-positioned, seems illogical to market experts. Previously, similar escrow releases have automatically proceeded according to schedule, rendering recent events unextraordinary. Most released XRP returned to escrow, meaning any abrupt drops from release are irrelevant to XRP Coin.
In the short term, some investors were driven to panic sell amid rumors of substantial sales by Ripple. However, it is reported that major investors, or whales, continued to accumulate large amounts of XRP during this time. Analyst Ali Martinez shared on social media that “whales accumulated 900 million XRP within 48 hours.”
In conclusion, Ripple’s escrow mechanism functions largely as planned. Released XRP has no lasting adverse market impact, and significant investors are increasing their positions. The situation reaffirms that decisions in the crypto market should be based on concrete information and analysis, not rumors.
