XRP (XRP) is always the subject of wild speculations. There are all kinds of projections as to where its price is going. Valuations like $589 a coin are constantly thrown out there. All these wild speculations are premised on the idea that XRP will free up over $20 trillion tied up in Nostro Vostro.
However, there is a misconception that this money will somewhat be converted into XRP, hence the $500 plus valuation speculations. However, logically what XRP will do is allow banks to free up this capital to be used in other purposes that the banks choose. That’s because it allows banks to send money across borders instantly, hence eliminating the need to hold reserves.
The impact on XRP
While banks will not be converting $20 trillion into XRP, they will still need to hold XRP for a few seconds, in the transaction process. When this starts happening at a global scale, and continuously, it will shore up the demand for XRP, thus pushing up its price. It’s simply a case of demand and supply. Then there is the fact that once banks start using XRP at scale, retail investors will believe in it more, further pushing up its demand.
Another interesting facet to it is that banks could use the money freed up from the Nostro Vostro accounts to trade in XRP. Banks are known to take massive financial risks, to maximize their returns. One of the risks they could take is to start actively trading in XRP just like they do with other assets. Just imagine a bank that, thanks to ripple XRP, suddenly has an extra $100 billion in its accounts.
Such a bank would have the incentive to trade in that money, and with such trading in XRP, demand would without a doubt rise. The influx of billions from bank trading would also mean that the price would be more stable and less susceptible to pump and dump schemes. This would draw in other institutions such as mutual funds further driving up the value of XRP in the long-run.
The impact on the global economy
By freeing up money from Nostro Vostro accounts, banks will be more incentivized to lend more to their business customers, and this spur growth, in most economies. Credit is critical for economic growth, and ripple could be the catalyst that the world needs for the next wave of growth.
In essence, as banks begin to adopt XRP, the impact will go beyond cross-border payments. It will be all encompassing, touching on all aspects of the economy. At that scale, the real value of the XRP coin will be unlocked. It will be worth multiples of what it is worth today.