A recent report by the European Securities and Markets Authority (ESMA) sheds light on an interesting trend within the cryptocurrency market. The report, published by ESMA’s Economic, Financial Stability and Risk Department in April 2024, highlights a divergence between XRP’s market capitalization and trading volume.
While XRP slipped below Solana and BNB in market cap share in late 2023, the ESMA data indicates the digital asset maintained a surprisingly high trading volume compared to these competitors.
The ESMA report focused on the influence of social media on cryptocurrency trading activity. As part of its analysis, the agency included data on the top 10 crypto assets by market cap and trading volume as of December 2023.
This data revealed that XRP’s trading volume remained robust throughout the fourth quarter of 2023, even after it relinquished its position among the top 10 to Solana and USDC.
Market Cap Shuffle: XRP Slips Behind Solana and BNB
Solana was poised to overtake XRP in market cap by December 8th, 2023, on the heels of a significant price increase. At that time, Solana held the sixth position with a market capitalization of $30.64 billion, while XRP trailed slightly behind at $34.42 billion.
By December 21st, 2023, according to a Times Tabloid report, Solana had overtaken XRP in market cap, pushing it down to the sixth spot.
Despite this shift in market cap ranking, the ESMA report demonstrates that XRP continued to record noteworthy trading volume throughout this period. Citing data from CoinMarketCap and Kaiko, ESMA revealed that XRP boasted an annual trading volume of $127 billion by December 31st, 2023.
This volume accounted for 2% of the annual trading volume within the cryptocurrency market. Notably, only market leaders Bitcoin (BTC), Ethereum (ETH), and stablecoins (USDT and USDC), surpassed XRP in this metric.
XRP’s $127 billion annual trading volume dwarfed that of Solana ($101 billion) and BNB ($41 billion) during the same timeframe. Interestingly, despite this higher level of trading activity, XRP’s price performance in Q4 2023 lagged behind its competitors. While XRP managed a modest 19.56% gain, BNB surged by 45.29% and Solana experienced a dramatic 376% price increase.
This disparity between XRP’s trading volume and price performance has sparked debate within the cryptocurrency community. Some commentators interpret this as evidence of XRP price suppression.
However, prominent XRP figure WrathofKahneman (WOK) offers an alternative perspective. WOK suggests that the data may indicate that the surge in XRP’s trading volume is primarily driven by its utility rather than purely speculative trading.
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Crypto Analyst Highlights XRP’s Utility
WOK highlights the continued functionality and development of the XRP Ledger (XRPL) as a potential explanation. The network has seen the introduction of an Automated Market Maker (AMM) functionality and is exploring the integration of a native lending protocol, stablecoin, and an EVM sidechain – all developments aimed at expanding the XRPL’s DeFi capabilities.
Additionally, the XRPL has established itself as a valuable tool for facilitating cross-border fund transfers. Tranglo, a Ripple partner specializing in international payments, has processed a total volume of $11.8 billion, with a portion of this volume involving XRP through Ripple’s On-Demand Liquidity (ODL) service.
While the XRPL demonstrates clear utility in facilitating financial transactions, WOK acknowledges a lack of significant new capital inflows into the XRP market. According to WOK, a substantial price increase for XRP would likely require a massive boost in demand, either from retail or institutional investors, or a dramatic increase in the value of funds being transferred using XRP.
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