TLDR
- WisdomTree predicts XRP will experience a supply shock much sooner than Bitcoin due to its fast-approaching supply ceiling.
- XRP’s deflationary model, where transaction fees are burned, has already removed approximately 12 million XRP from circulation.
- Ripple releases up to 1 billion XRP monthly, but unused tokens are locked back into escrow contracts.
- Unlike Bitcoin, which will continue its gradual issuance until 2140, XRP will reach its supply limit in the next few years.
- XRP’s utility-driven model, with low transaction fees, enhances its appeal as both a functional and scarce asset.
A recent report from WisdomTree predicts that XRP will face a supply shock much sooner than Bitcoin. XRP’s supply ceiling is nearing faster than Bitcoin’s, which has a much longer issuance schedule. The report also highlights XRP’s deflationary mechanism through transaction fee burns, which continuously reduce its circulating supply.
XRP’s Deflationary Supply Model
According to WisdomTree, XRP’s supply will be capped in the next few years. The cryptocurrency benefits from a deflationary model, where transaction fees are burned. Since its inception, this mechanism has removed about 12 million XRP from circulation.
https://x.com/SMQKEDQG/status/1969416200464556511
In addition to the burning of transaction fees, Ripple’s escrow mechanism plays a role in XRP’s supply. Ripple releases up to 1 billion XRP monthly, but much of this is placed in escrow. The unused XRP is locked back into new escrow contracts, making its release gradual.
This supply model ensures that XRP’s circulating supply will not expand indefinitely. Once the remaining XRP becomes fully liquid, burning transaction fees will be the only factor influencing supply. This process could lead to a gradual contraction in supply over time.
Bitcoin’s Gradual Issuance Timeline
Unlike XRP, Bitcoin’s supply is set to continue growing until it reaches its cap of 21 million units around 2140. The cryptocurrency follows a traditional mining model, which ensures a steady release of new coins. Bitcoin’s supply will only start to diminish in the far future, setting it apart from XRP’s rapid supply limit.
The distinction between XRP and Bitcoin’s supply schedules highlights their unique positions in the crypto market. While Bitcoin’s issuance extends well into the future, XRP’s capped supply will result in a supply shock much earlier. This tightening of XRP’s supply could lead to price growth, especially if demand for the asset increases.
Despite these differences, both cryptocurrencies share one trait: scarcity. The comparison emphasizes that XRP’s rapid supply ceiling could create an advantage over Bitcoin in the short term.
XRP is built for efficient, low-cost transactions, further boosting its potential in the digital asset market. Its transaction fees are a fraction of a cent, making it a preferred option for payments and settlements. This practical utility, combined with a deflationary supply model, could make XRP a more attractive asset.
