The rumour mill was hard at work again when word spread online that Ripple was preparing a significant buyback of its circulating supply of XRP coins. This action is considered by those that purport the idea as an effort to address concerns about overstock and price volatility while enhancing the usefulness and value of XRP.
The would-be buyback program is said to stabilize prices, draw institutional investors, and positively affect the Ripple ecosystem. Additionally, it might increase transaction efficiency and liquidity on RippleNet, the company’s worldwide payment network. According to proponents, the buyback announcement demonstrates Ripple’s faith in XRP’s future and its capacity to overcome regulatory obstacles.
If real, the buyback would have been large-scale, with 10 Billion XRP or 10% of the total token supply at a current market value of USD 4.8 Billion at press time, according to data from CoinMarketCap.
Prominent crypto lawyer John Deaton wasted no time jumping to Twitter to state: “I don’t believe Ripple is buying back 10B XRP until I hear it from Ripple.”
And Ripple’s Chief Technology Officer David Schwartz, also known on Twitter under the moniker Joel Katz, weighed in, stating that: “We do sometimes buy XRP. But I don’t know of anything specific that this could be referring to. And there’s no official source mentioned.”
The rumours about a buyback have been making their way around social media for some time now but have gained traction with a recent blog post in CryptoAlert, which crypto Twitter took and ran with. However, it is no surprise that Ripple trades in XRP; after all, Ripple holds approximately 50 Billion XRP tokens in its Escrow.
In theory, by limiting the number of tokens in circulation, a buyback could help control the supply of XRP, potentially raising its value through more scarcity. A buyback also increases liquidity, facilitating users’ buying and selling of XRP and encouraging wider adoption.
Given that Ripple has such large amounts of XRP, it begs the question of why Ripple would buy more XRP at this point, especially given the ongoing lawsuit and the huge cost Ripple has with the litigation.
On where the money for such a large acquisition would come from, Bill Morgan, an Australian crypto lawyer, said: “Where are they obtaining the $5 Billion to buy it at its current price. Who would lend Ripple the funds, given the lawsuit, to buy back a token under a litigation cloud – unless there is another source of funding such as an IPO.”
The XRP community, meanwhile was divided, with some spreading the rumors while others urged for calm and caution. Popular YouTuber Crypto Eri said: “Is it time we start to research before retweeting?”
This, of course, underlines the increasing role that social media plays in the crypto economy and urges caution, bringing us to the all-important phrase “do your own research”.