Ripple's co-founder Jed McCaleb sold 1 million XRP. Is this a sign that he has zero confidence and what does this mean for XRP investors?
Many of you would agree having a belief in a cryptocurrency is a determining factor before purchasing some. This belief would lead to you holding on to it and adding more. A firm believer would adopt the cryptocurrency and use it to complete real-world transactions. You would also have the confidence your investment will show a steady increase in value.
Conversely, if you lacked belief, you would sell off that cryptocurrency. You would not have the confidence to use it regularly for any kind of transaction. Perhaps you might invest in another cryptocurrency instead? Buying up sizeable amounts is not something you will do.
So, what does it look like when both the co-founder and CEO of Ripple sell-off XRP? Does this not suggest they have little confidence in the long-term future and value of Ripple?
Co-founder Jed McCaleb sells 1 million XRP daily
First up, we have Jed McCaleb, one founder of Ripple. He sells an average of 1 million XRP each day. McCaleb was only with Ripple between 2011 and 2013 but somehow negotiated an agreement whereby receives sizeable amounts of XRP. At the start of May, reports claimed he received another payment, this time of just over 55 million XRP. In fiat terms, this is not far short of $12 million.
A glance at his XRP wallet ledger shows he sells this crypto off in instalments. He is selling and pocketing an average of $260,000 each day. Would he be doing this if he still believed in the project he helped build? We will let you answer that question for yourselves.
CEO sells off XRP to cover losses
A disgruntled former founder selling off XRP is one thing - this could come down to wanting nothing to do with Ripple. Yet, when the CEO admits to selling XRP too, alarm bells must ring? CEO, Brad Garlinghouse, is on record as admitting to selling millions of dollars worth of XRP each quarter.
In the third quarter of 2019, Ripple sold off just over $65 million of its cryptocurrency. Why? According to Garlinghouse, Ripple would not be profitable or cash flow positive otherwise. Ripple is not making enough revenue to turn a profit without selling its coin. This alone is alarming for a cryptocurrency and payment platform which has comprehensive plans to become a real-world solution.
Perhaps those plans were bearing fruit. A partnership with leading international money transferring company such as MoneyGram suggests so. There are more partnerships too. The problem is none of these partnerships generates revenue for Ripple. Why not? Ripple pays for those partnerships and collaborations. Ripple paid out more than $11 million in XRP to MoneyGram in the second half of 2019 alone. This is on top of the $50 million Ripple gave to MoneyGram as part of the partnership agreement.
As a collaboration, both platforms should work together on joint projects to increase revenue. One should not be paying the other significant sums of money. Could Ripple be paying for nothing more than being connected to a major brand? many commentators have suggested as much.
Could this be an exit plan?
Warning signs should go off when any company is not making enough revenue. Ripple would not survive without selling off XRP each quarter. That is a cold, hard fact. It does take an expert analyser to assume an exit strategy is being used by Ripple. If team members both past and present are selling off XRP, the reasoning can only be to cash in before the cryptocurrency is worthless.
As a holder, strong recommendations are to stay alert if you wish to continue holding. In fact, many recommendations are to dump XRP in the same way as they have. As for the braver traders among you, this could bring opportunities for quick profits. Just be sure not to get caught out.