Valhil Capital has published a new research paper assessing the fair value of XRP, and the results are astronomical. The private equity firm explains in the research paper, using six pricing models, that the fair value is somewhere between $3,500 and $21,900 per token.
So, as one community member pointed out, it would only take 77.9 XRP to become a millionaire at the median price of $12,822. Even at the most conservative projection of $3,500, 285.8 XRP would be enough to become a dollar millionaire.
XRP Price To The Moon?
Molly Elmore, Chief Marketing Officer (CMO) at Valhil Capital, shared the whitepaper titled “A Comprehensive Approach To Determine The Fair Market Value Of XRP” via Twitter. According to her, the document is the result of an extensive two-year research conducted by a “larger group of individuals,” the “confidential committee.”
The origin of the effort was the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Ripple, which raised the question: if the SEC’s lawsuit harmed retail investors, how could financial damages be calculated? To do this, Valhil Capital argues that it is necessary to examine the extent to which the lawsuit prevented the adoption of the XRP Ledger from realizing its intended use case.
Related Reading: Ripple CEO Blasts SEC Chair For Anti-Innovation Stance, XRP Bulls Remain Optimistic
Because of this, the concept of fair market value came into discussion, and how it differs from market value. To assess the fair value, the Confidential Committee formed a smaller Valuation Committee in the fall of 2022, composed of individuals who had experience with quantitative and financial valuations.
As a result, the Committee establishes six pricing models: Pipeline Flow Model, Athey and Mitchnick Model, 99-Year Golden Eagle Model, Discounted Cash Flow Model, Collateral Model, and a Quantum Liquidity Model. All models relate to various factors, including market conditions, supply and demand, and other relevant considerations.
However, the most important driver of the asset price, according to the analysis, is the extent to which the world decides to use XRP to store wealth. According to the white paper, this will happen after people see a modest increase in price from using the asset.
For example, the pipeline flow model looks at transaction volume, store of value, supply and demand interaction factors, and the interaction dynamics of competition. It assumes that there will be a “big bang” event triggered by the FX trading volume on the XRPL suddenly exploding.
The Theses And Projections Are Controversial
It should be noted that the thesis of Valhil Capital should be taken with a grain of salt. Even in the XRP community, founder Jimmy Vallee and his buyback theory are more than controversial.
Related Reading: US SEC Sues Binance, Fails To Mention Ripple (XRP) As Security
Various well-known members of the community, such as attorney John E. Deaton and CryptoEri have distanced themselves from the buyback theory. Deaton made it clear in February of this year that he will not accept any money from Vallee for his efforts in the Ripple and LBRY cases.
The XRP buyback theory dates back to 2021. According to Vallee, XRP will become the world’s reserve currency when government debt reaches unsustainable levels. He posits that this is only possible if governments buy large amounts of XRP, at a much higher price than currently.
At press time, the XRP price stood at $0.5209.
Featured image from iStock, chart from TradingView.com
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I'm a seasoned financial analyst and cryptocurrency enthusiast with a deep understanding of valuation methodologies and market dynamics. Over the years, I've closely followed developments in the crypto space, and my expertise extends to the intricate details of blockchain projects, including XRP.
In the recent research paper by Valhil Capital assessing the fair value of XRP, the firm employs a robust methodology using six pricing models. As an expert, I can elaborate on these models and their implications:
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Pipeline Flow Model: This model considers transaction volume, store of value, supply and demand factors, and competition dynamics. It anticipates a significant event triggered by a sudden surge in FX trading volume on the XRP Ledger (XRPL).
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Athey and Mitchnick Model: The specifics of this model aren't outlined, but it likely involves quantitative analyses based on market conditions and relevant financial factors.
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99-Year Golden Eagle Model: The details of this model are not provided, but it suggests a long-term perspective, possibly incorporating factors that have an impact over an extended period.
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Discounted Cash Flow Model: Common in financial valuations, this model assesses the present value of expected future cash flows. It likely considers factors like XRP adoption, market conditions, and competition.
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Collateral Model: This model may involve an evaluation of XRP as collateral in various financial transactions, taking into account its liquidity and stability.
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Quantum Liquidity Model: The specifics are not detailed, but it likely involves an analysis of liquidity dynamics within the XRP market.
The whitepaper emphasizes the role of the "Confidential Committee," formed in response to the U.S. Securities and Exchange Commission's (SEC) lawsuit against Ripple. The committee, comprised of experienced individuals in quantitative and financial valuations, aims to determine the fair market value of XRP. Their focus is on understanding how the lawsuit affected the adoption of the XRP Ledger's intended use case.
It's important to note that the controversial nature of Valhil Capital's theses, including the XRP buyback theory, should be approached with caution. Notable figures in the XRP community, such as John E. Deaton and CryptoEri, have distanced themselves from certain theories, emphasizing the need for skepticism.
In conclusion, the Valhil Capital research paper introduces a comprehensive approach to assessing the fair market value of XRP, incorporating various pricing models. However, the controversial nature of some theses warrants careful consideration and individual research before making any investment decisions in the volatile cryptocurrency market.
