[header date=”29 January 2019″]Ripple banks XRP sales, excess mining inventory drags down Nvidia, and bitcoin finds a home in the contemporary art scene.[/header]
Ripple raises questions
Ripple, the creator and largest owner of the crypto token XRP, brought in more than half a billion dollars by selling a tiny portion of its XRP reserves in 2018. In the fourth quarter alone, the company made $40 million selling XRP to institutions and another $89 million selling it on the open market. Altogether, the company, which says XRP can be used to “provide liquidity” for foreign exchange trading, raked in $535 million selling its reserves.
However, ahead of Ripple’s fourth-quarter report, Messari—a cryptocurrency research firm based in New York—cast doubt on the popularity of XRP. Messari said XRP’s circulating market cap is much lower than the $12 billion implied by Ripple—as much as $6 billion lower—and consequently, that the token is much less liquid than previously believed.
Messari said because of trading restrictions on XRP distributed to Ripple’s founders and various partners, it estimates the market cap for XRP in circulation is actually about $6.9 billion. After publishing the analysis, Messari founder Ryan Selkis received significant blowback from the XRP Army on Twitter (more on them below) and tweeted that his family had even been threatened over the matter.
In a CoinDesk article, Ripple disputed Messari’s calculation. In an email to Quartz, Ripple’s spokesperson says they prefer to talk about XRP’s total market cap of $28.9 billion rather than the circulating segment.
Market cap is a simple calculation: the current price of XRP multiplied by outstanding tokens. But how you measure the XRP price (based on a single exchange or an average across a few exchanges) and how you measure outstanding tokens (circulating versus total supply) is up to you.
Considering the various lockups and potential wash trading in foreign markets, getting a full picture of XRP is difficult. Messari rightly notes that without details on “contractual restrictions” for XRP distributions, it’s tough to guess at the true circulating supply. Ripple also ought to explicitly disclose which exchanges they sell through and the number of units of XRP sold—not just the dollar values acquired. These steps would allow retail consumers to understand how Ripple and large XRP stakeholders might depress prices.
While little can be gleaned from market cap alone, what’s curious is that Ripple’s XRP sales were substantially higher in the second half of 2018, despite the overall decline in the crypto market. Indeed, 80% of direct sales—labeled as “institutional direct sales” in the third and fourth quarter—occurred in the latter half of the year, bolstering Ripple’s claims of institutional adoption by currency traders. But given the murkiness surrounding the token, XRP investors should be wary of financial estimates, no matter the source. —Matthew De Silva
[supplemental headline=”Market chatter: Nvidia still has a crypto hangover”]
The graphics chipmaker’s shares tumbled 16% yesterday after slashing its fourth-quarter revenue forecast by some $500 million. Nvidia had earlier warned of an inventory glut following the crypto boom, and yesterday the Silicon Valley-based company said “deteriorating macroeconomic conditions, particularly in China” were sapping demand for its gaming graphics processing units (GPUs). The chip company said its data center revenue also slumped.
[img src=”https://cms.qz.com/wp-content/uploads/2019/01/atlas_ry79WKTXN@2×1.png”]
Nvidia is so far seeing slack demand for its latest generation Turing GPUs, likely because because graphics cards previously used for crypto mining are finding their way back into the market. As family office fund manager Chad Kusserow said, “why pay up for Turing when many cheap, good-enough options [are] available?”
For the crypto crowd, this suggests miners are continuing to switch off or even sell their rigs, gradually reducing pressure on virtual coin supply. If demand for tokens stabilizes or increases (a big if), this bottoming out of supply from the mining sector could be a boost for crypto prices.
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On the record: Elio D’Anna
[img src=”https://cms.qz.com/wp-content/uploads/2019/01/HOFA-PROFILE-PIC-1-e1548762520665.jpeg”]
Elio D’Anna—seen with partner Simonida Pavicevic, right—is founder and managing director of The House of Fine Art, an international gallery which specializes in contemporary art by established and emerging artists. HOFA made its entire portfolio—valued at $150 million—available for purchase in bitcoin last fall. D’Anna spoke with Quartz’s Matthew De Silva.
Quartz: Why did you start accepting bitcoin?
D’Anna: We saw a growing demand from collectors, asking if we were able to accept crypto as a form of payment. So, we started looking into the options and we realized that one of our collectors was actually CEO of [crypto exchange platform]Uphold at the time.
We had installed this painting in his house, we were really happy. We were having a glass of wine, just sort of enjoying the moment, and it comes out that he’s the CEO of Uphold. We looked into it later, and it was a very large company … converting different currencies into cryptocurrencies and vice versa. So, we decided to team up.
What was that process like?
We created an account, we made an agreement. We had to go through a lot of vetting … obviously there’s a lot of very strict money laundering [rules]. So, we made sure that everything was compliant.
So, we started being able to accept crypto as a form of payment. Then, we did a show called Qvantum, the first ever crypto-only art show.
How does your payment system typically work?
Keep in mind, we were born as an international gallery, born out of London, then expanded into Mykonos, Los Angeles, and so on. So, we were very strong online.
Normally we would get an inquiry and we’d have a British pounds price because we’re a London gallery. So, [if you’re] an American client and [you ask to] pay in US dollars, we have a US dollar account, we do a conversion that would make sense. And you’d be like “Okay, I’m happy paying that in US dollars” and that’s it.
Similarly, now, we have the same in cryptocurrency. We have a value and a rate, so if somebody holds ethereum or bitcoin, we can accommodate that form of payment.
Have you saved money as a result of using crypto?
For sure, yes. We do hundreds of transactions each day—credit card charges, international wires. Every time, with a bank, we get a charge of $30-$40, so that’s all saving. I really think, in the future, this is something that’ll be more attractive to corporations and companies.
[img src=”https://cms.qz.com/wp-content/uploads/2019/01/Joseph-Klibansky-_-The-Thinker_.jpg”]
The Thinker by Joseph Klibansky
How did you time your entrance into the crypto world?
We decided to jump in when we felt [bitcoin] had become a more stable commodity. Although it is fluctuating, of course—when something goes from $1,000 to $20,000, it can also drop to $5.
But it’s gotten to a point where it may not be doing these jumps…
When I saw it going down a bit, that’s when I thought, people are going to want to spend it. Because that’s the moment when you’re like “Oh, I want to get rid of it. I want to convert it into something more stable than bitcoin.”
Were you concerned about getting saddled with bitcoin as it plummeted?
Not really, because our prices were anyway set against US dollars or British pounds, so it’s like there’s a certain time that we wouldn’t lock in—necessarily—the price of the bitcoin itself.
Do you prefer to accept cryptocurrency in a specific jurisdiction?
Accepting it is not the problem. The main issue has been really about spending it. A lot of people bought into it, but there haven’t been a great deal of interesting platforms to spend it on.
That’s what we’ve tried to offer. Maybe for small online transactions [using bitcoin is sensible]. But packaged holidays or interesting experiences that a client can spend on with cryptocurrency aren’t really present.
Has your audience changed as result of accepting bitcoin?
Yeah, I would definitely say the clientele that wants to spend crypto is, in our experience, slightly younger. With art, everything is very personal. I wouldn’t say their form of payment defines their taste as such. But I do see a certain demographic and I do see that these are more trendy guys who are very social-media aware. They like a lot of stuff that is a little more flashy, maybe less subtle.
On Jan. 31, HOFA begins a solo exhibition in Los Angeles for Joseph Klibansky—a Dutch artist known for his mixed media, surrealist cityscapes, who previously sold one of his pieces to a Swiss collector for $1.4 million worth of bitcoin.
[supplemental headline=”De-jargonizer: XRP Army”]
The “XRP Army” is an informal collection of Twitter accounts which express ardent but not always well-informed support for XRP, the second largest digital asset by market cap (now about $11 billion). Whenever a crypto commentator raises concerns about XRP or wonders about the role played by Ripple—the company which owns more than half of the outstanding XRP tokens—the Army springs into action, shouting down, harassing, and gaslighting the naysayer. The people, or perhaps bots, behind these accounts overwhelm skeptics with dozens, and even hundreds, of antagonistic comments, so it can be a little scary to invite their wrath.
Prominent members of the XRP Army include Tiffany Hayden, a “recovering bitcoin supporter” with 70,000 Twitter followers (notably, not an employee of Ripple) and XRP Trump. Some of the most popular hashtags they use to drum up support for XRP include #XRPthestandard, #XRPthebase, and of course, the classic #XRPArmy. Whether or not XRP becomes a global payments standard, these people think they can become part of the new 1% by investing in the coin—so, if you want to call them out, be prepared for a Twitter blitz.
[mailto filter=”Jargon” subject=”De-jargonize this…”]Heard a new crypto term? We can tell you what it means.[/mailto]
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