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How XRP Investors Got Played by Ripple’s Strategic Moves.

Updated: Jul 3

An 8 Part Exposé

Part 1: Ripple’s Business Model Revision – The Dark Side Of ODL.

How Ripple surreptitiously changed the fundamental nature of XRP after investors had already committed funds. Contrary to popular belief market forces DO NOT play a significant role in the price of XRP. Ripple, almost exclusively, shapes the price of XRP.

XRP Market Manipulation

Part 1: Ripple’s Business Model Revision – The Dark Side Of ODL.

How Ripple surreptitiously changed the fundamental nature of XRP after investors had already committed funds. Contrary to popular belief market forces DO NOT play a significant role in the price of XRP. Ripple, almost exclusively, shapes the price of XRP.

Brad Garlinghouse and David Schwartz have artfully dodged disclosing critical information about its liquidity sourcing practices, control over XRP supply and so much more.

Coming Soon

Part 3: Market Manipulation & Judge Torres’ Dereliction.

Ripple and it’s influencers repeatedly make the deceitful claim that there is now clarity that XRP is not a security. The deceit is by omission and deflection. Brad Garlinghouse, David Schwartz and their lacky influencers resolutely fail to mention that the Judge had CLEARLY ruled that XRP WAS A SECURITY when sold to institutional investors.

Part 4: Ripple’s Double Talk - The Truth Behind Ripple’s AMM Integration

While AMM is a common mechanism used by exchanges, Ripple’s integration of AMM with its large reserves of XRP and its ODL service creates a unique scenario for market manipulation. Unlike typical exchanges that rely on user-provided liquidity, Ripple can directly inject liquidity from its own reserves. The ability to control liquidity is a form of market manipulation.

Part 5: Judicial Bias? There is Something Seriously Amiss in the NY Judicial System.

Judge Torres concurred with the SEC that Ripple had violated securities law when it sold XRP to institutional investors, privately. So, why did Gary Gensler and the SEC abandon criminal indictments, WITH PREJUDICE? Why did Judge Torres readily sanction the capitulation? Was there a sidebar to induce the SEC and Judge Torres to gratuitously surrender to Ripple?

Part 6: The Mystery of Institutional Silence.

Why haven’t institutional investors filed claims against Ripple for selling them unregistered securities? Because Ripple and institutional investors are “the whales” secretly transferring large amounts of XRP as part of settlement agreements “off the exchanges”; in full view of, and possibly, with a silent nod from Gary Gensler and Judge Analisa Torres.

Part 7: Ripple's IPO and ETF Mirage: The Truth Behind the Hype.

Ripple's strategy hinges on keeping retail investors invested in the potential of XRP. The deceitful idea of a forthcoming IPO or an ETF approval serves as a powerful motivator for these investors, many of whom are already deeply invested and hopeful for significant returns; which Ripple knows will elude them and is actively making sure it does not happen.

Part 8: The Imminent Collapse of XRP and Implosion of Ripple Inc.

Retail investors have been the backbone of XRP's price stability, largely due to the speculative hype around potential wide scale adoption and IPO and ETF approvals. Once this illusion is shattered, the crash of XRP and the catastrophic effect it will have on the crypto market and the crypto industry as a whole, will pale in comparison to the FTX debacle. Sam Bankman-Fried can perhaps look forward to at least 3 members of the fraternity to share his lodgings with.

Part 1

Ripple's innovative payment solutions have, undoubtedly, positioned XRP as a potential game-changer in the world of cross-border payments. Yet, despite significant partnerships and technological prowess, the price of XRP has remained stagnant, much to the frustration of its loyal investors. This stagnation contrasts sharply with the behavior of other, far less significant crypto projects, whose prices surge with even modest partnerships. So, what's really happening with XRP?

Our series of 8 essays will expose the hidden dynamics at play and adduces how Brad Garlinghouse, David Schwartz and Chris Larsen surreptitiously changed the fundamental nature of XRP after investors had already committed funds, all to benefit themselves while leaving early investors out in the cold.

Institutional Adoption Of RippleNet & XRP

To adopt XRP for cross-border payments, commercial banks, hege funds, pension funds and other institutional investors would need to integrate Ripple’s technology to leverage XRP effectively. RippleNet is Ripple’s global payment network that connects financial institutions using a standardized protocol. Banks would need to integrate RippleNet into their payment processing systems. Ripple provides APIs (Application Programming Interface) that enable seamless connectivity between the bank’s systems and RippleNet. The integration allows for real-time processing and tracking of payments.

Ripple utilizes its native token, XRP, as a bridge currency to facilitate seamless transactions between two different fiat currencies. When a payment is initiated, XRP is used as a liquidity tool, enabling the near-instantaneous conversion of the sender's currency into XRP. The XRP is then swiftly transferred across the Ripple network before being converted into the recipient's currency.

Presented below is a hypothetical scenario in which Trader A's bank in Singapore and Buyer B's bank in Australia use RippleNet and XRP to facilitate a cross-border payment.

Initiation of Payment:

  • Buyer B initiates a payment from their bank account in Australia (Bank B) to Trader A's bank account in Singapore (Bank A).

  • Buyer B's bank (Bank B) is integrated with RippleNet and uses XRP for the cross-border payment.

Conversion to XRP:

Bank B sends a payment request to a crypto exchange in Australia through RippleNet. Bank B initiates a transaction to convert Australian dollars (AUD) into XRP. This conversion is facilitated through a crypto exchange in Australia that has a partnership with Ripple. It will have integrated RippleNet into their systems for the process to be seamless.

  1. Role of the Crypto Exchange:

Crypto Exchange in Australia: The exchange then receives AUD from Bank B and converts it to XRP. This exchange must have sufficient liquidity in both AUD and XRP to handle the transaction. The AUD liquidity is obviously provided by Bank B when Bank B initiates the transaction. So, where does Bank B get the required XRP from? Most likely directly from Ripple’s own reserves or the escrow accounts via RippleNet / ODL service, that is intergrated with their systems.

(N.B. While there is evidence suggesting that Ripple plays an active role in ensuring liquidity through mechanisms like ODL, the specific terms, guarantees, and use of technologies like smart contracts are not publicly disclosed. This issue will be discussed in Part 2) .

The exchange processes the conversion and sends the corresponding amount of XRP to the designated Ripple wallet address assigned to that exchange.

  1. Transfer of XRP:

The XRP is then transferred across the RippleNet network from the Australian exchange's wallet to a Ripple wallet assigned to Bank A or an associated intermediary wallet that Bank A can access.

  1. Conversion to SGD:

  • Upon receipt of the XRP, Bank A in Singapore needs to convert the XRP into Singapore dollars (SGD) to credit Trader A's account.

  • The XRP is sent to a crypto exchange in Singapore that is integrated with RippleNet and Bank A.

  • The exchange converts the XRP into SGD based on the current exchange rate.

  • The converted SGD is then credited to Trader A's account in Bank A. Trader A receives the payment in SGD, completing the cross-border transaction.

It is the Crypto Exchanges that perform the conversion between fiat currencies (AUD and SGD) and XRP and enable the actual transfer of XRP across borders using RippleNet. RippleNet streamlines the cross-border payment by providing a direct, efficient and a method of transferring funds that does not involve the banks directly. This method keeps the banks on the up and up with regulatory compliance. This system also eliminates the need for multiple intermediaries (and the need for banks to hold US dollar and other currency reserves) and significantly speeds up the transaction.

The Need For Supply Stability (Escrow) & Liquidity (ODL)

However, for the process to function effectively and efficiently, there needs to be enough XRP tokens available in the market to facilitate transactions – which is what is meant by “liquidity”. Before Ripple established it’s escrow accounts, there was a total supply of 100 billion XRP tokens. Ripple held a significant portion of the total supply, but these holdings were not all in active circulation. They were controlled by Ripple and not freely available in the market. The circulating supply, therefore, was significantly less than 100 billion, as it only included the XRP that had been distributed to the market and not the XRP held by Ripple. At that time, one of the biggest concerns among investors was the potential for Ripple Labs to flood the market with XRP, given that the company held a significant portion of the total supply. This concern could have led to price volatility and instability.

Now, this is where things get interesting. In order to assuage market concerns, In 2017 and 2018 long after XRP had started trading on public exchanges, Ripple made several strategic changes, most notably the establishment of XRP escrow accounts and the launch of the On-Demand Liquidity (ODL) service. These moves were ostensibly made to provide predictability and stability to the XRP supply and to facilitate instant cross-border transactions. However, a closer look reveals that these mechanisms primarily served Ripple’s interests, at the expense of, and without regard for, Ripple’s early investors.

Enter Stage Left - Ripple's Escrow System.

  1. Escrow Mechanics:

  2. In December 2017, Ripple locked 55 billion XRP in escrow using smart contracts on the XRP Ledger. These smart contracts are programmed to release 1 billion of XRP each month.

  3. Any unused XRP from the monthly release is returned to the escrow, effectively re-locking it for future use.

  1. Predictability and Transparency:

  • The escrow system provides predictability by ensuring that a fixed amount of XRP enters the market each month, thus preventing sudden large releases that could flood the market and destabilize prices.

  • This mechanism is allegedly transparent, but only to the extent that it is enforced by the consensus protocol of the XRP Ledger, which means that the release schedule cannot be altered arbitrarily by Ripple.

In essence, the introduction of escrows did not change the total supply but managed the potential circulating supply by ensuring that large amounts of XRP were not suddenly introduced to the market. This structured release helped mitigate fears of market flooding and price instability, to an extent.

So far so good, right? Not really. Actually, XRP investors got played by Ripple’s strategic moves.

Enter Stage Right – Ripples “On-Demad-Liquidity (ODL)”.

Less than a year after establishing the escrow system, Ripple introduced its On-Demand Liquidity (ODL) service in October 2018. The service was initially launched under the name "xRapid" but was later rebranded as ODL. ODL was designed to leverage XRP as a bridge currency to provide liquidity between different fiat currencies. But, remember, Ripple is a private, for-profit enterprise. Altruism is not in the business equation in such enterprises. An examination of the market movements of XRP suggests that Ripple’s systems are not designed to source liquidity from the open market.

Liquidity Provision by Ripple:

Financial institutions that choose to adopt the RippleNet system, invariably sign on to the ODL service being integrated into the system. It just makes sense for the sake of efficiency and, in many cases, to meet regulatory requirements. Most jurisdictions do not allow financial institutions to hold crypto accounts or dabble on crypto exchanges without onerous disclosure requirements.

When using Ripple's ODL service, the source of XRP can be either:

  • Ripple's Reserves: Ripple might provide liquidity directly from its reserves if it has allocated XRP for this purpose.

  • Escrow Accounts: XRP from the escrow accounts could also be used, depending on how Ripple has structured its liquidity management and release schedules.

Unless Ripple proves otherwise, it can be assumed that Ripple’s ODL service DOES NOT source XRP from the market. This means that Ripple can act as the intermediary, to facilitate the currency conversions needed for cross-border transactions.

It is Ripple that interfaces with crypto exchanges and provides these exchanges with the liquidity in XRP that it needs, to convert the fiat currency provided by the financial institutions into XRP. By providing instantaneous access to XRP liquidity through Ripple’s own reserves and escrow accounts whenever needed, ODL effectively eliminates the need for the exchanges to hold XRP in reserve to facilitate the transaction.

Supply and Demand Dynamics & Misconceptions about Price Explosion

The upshot is that Ripple's ODL service effectively ensures that there is never a shortage of supply of XRP by providing on-demand liquidity for cross-border transactions. This mechanism aligns with economic principles of supply and demand preventing extreme price fluctuations.

Come on folks! Its right there, inherent in the name itself – "On-Demand Liquidity" !!

It is very likely that Ripple has programmed the whole RippleNet ecosystem in a way that prioritizes liquidity sourcing from Ripple’s own vast reserves and/or escrowed accounts. This, in effect, limits the role of market forces on the price of XRP. Contrary to popular belief, market forces DO NOT play a significant role in the price of XRP. Lets face it, why would any exchange agree to have Ripple’s systems integrated with theirs and provide the conversion service if they are then required to hold an indeterminate (and potentially large) quantity of XRP to provide the necessary liquidity to process cross border transactions?

Any notion of a price explosion contradicts the fundamental principles of market economics and fails to account for the robust liquidity infrastructure provided by Ripple’s ODL service. XRP holders have been hoping for years that the price of XRP will "explode". Such hope is fundamentally at odds with the laws of supply and demand. In a well-functioning market with efficient liquidity mechanisms like ODL, extreme price fluctuations are unlikely to occur.

In Part 2, we will discuss what else Ripple is hiding in plain sight.


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