Why can't Ripple freely sell 35.9 billion escrowed XRP? Key mechanism revealed

In the cryptocurrency market, the supply structure of Ripple (XRP) has always been the focus of investors' attention. Recently, cryptocurrency researcher SMQKE shared a chart from the SBI Group titled "XRP Distribution," revealing a key fact that many investors have overlooked: Ripple does not have the freedom to sell the large amount of custodied XRP it holds. This finding is significant for understanding the market supply dynamics and price stability of XRP.

####XRP Supply Structure: The Truth Behind the Digital Asset

(Source: SBI Group)

According to detailed data from the SBI Group, the total supply of XRP is 100 billion coins, and its distribution is as follows:

Circulating Market: Approximately 59.24 billion XRP (Market value approximately 28 trillion yen)

Burned: Approximately 10 million XRP (through the transaction fee mechanism)

Ripple directly holds approximately 4.85 billion XRP (not in circulation)

Custodial Lockup: Approximately 35.9 billion XRP (nearly 40% of total supply)

These data reveal a key fact: Although Ripple controls a large amount of XRP, the vast majority of it (35.9 billion coins) is in custody status and subject to strict release conditions, making it impossible for the company to freely dispose of or sell.

####Custody Mechanism: The Guardian of XRP Market Stability

The custody feature of the XRP ledger is a smart contract mechanism that ensures that locked tokens cannot be used or destroyed until specific conditions are met. For Ripple, this means that they cannot suddenly flood the market with a large amount of XRP, thereby protecting token holders from potential supply shocks.

Michel Blanc provided a deeper explanation during the discussion, pointing out that since 2017, Ripple has released 1 billion XRP per month from its escrow accounts, but most of it is returned to escrow. According to reports, Ripple actually only uses about 200 million to 300 million XRP per month for operational needs, with the rest being re-locked.

####Three Major Impacts of Custody Restrictions on the XRP Market

#####1. Improved Supply Predictability

The custody mechanism creates a highly predictable supply release schedule, enabling market participants to accurately estimate future supply changes. This transparency reduces market uncertainty and helps investors make more informed decisions.

#####2. Reduce Sell Pressure

Due to Ripple's inability to release all the escrowed XRP at once, the market is protected from the risk of sudden large-scale sell-offs. This mechanism is designed to effectively disperse potential selling pressure, preventing drastic price fluctuations.

As pointed out by Blanc, this approach "ensures predictability and reduces the risk of sudden large-scale sell-offs," having a positive impact on market stability.

#####3. Establish long-term scarcity

The destruction mechanism of XRP transaction fees, although currently small in scale (about 10 million coins), will gradually increase as network usage rises. In the long term, this token destruction mechanism will enhance the scarcity of XRP, potentially having a positive impact on its value.

####Market Misunderstandings and Investment Insights

Many investors and critics often misunderstand the significance of Ripple holding a large amount of XRP, believing that the company can sell these tokens to the market at any time. However, data from the SBI Group clearly indicates that most of Ripple's XRP holdings are subject to strict custody mechanisms and cannot be freely sold.

This fact has several important implications for investors:

Lower supply shock risk: Ripple cannot suddenly release a large amount of XRP into the market, which reduces the supply shock risk.

Long-term holding is more secure: The custody mechanism provides additional market stability protection for long-term XRP holders.

Market manipulation becomes more difficult: Due to strict control over supply release, it is significantly harder for a single entity to manipulate the XRP market.

Transparency Advantage: Compared to many crypto assets projects, XRP's supply structure and release mechanism are more transparent and predictable.

####Future Outlook: Long-term Impact of Custody Mechanisms

As time goes by, the XRP managed by Ripple will be gradually released according to the scheduled plan, but this process will take several years. Considering that the actual amount of XRP used by Ripple each month is far lower than the release limit, this process may take longer than initially expected.

In the long term, this slow and predictable supply growth model, combined with the actual application expansion of XRP in the cross-border payment field, may create a healthier growth environment for token value.

For investors who follow XRP, understanding how the custody mechanism works and its impact on market supply is crucial. This helps make more informed investment decisions and avoid market panic based on false assumptions.