XRP Breaking the Market Cap Myth

Jake Claver

Why could XRP and other digital assets reach valuations that seem impossible by traditional market cap standards? Learn how these networks function more like email protocols than stocks, where value comes from moving trillions in transactions rather than company earnings. A fresh take on why traditional market cap limitations don't apply to the future of digital assets.

Transcript

00:00If XRP goes to $50,000, $100,000, $10,000, the market cap for the asset is going to look

00:07absolutely absurd to most people, and we're going to break down why and how that can happen

00:12in this video. All right, so many people look at digital assets the same way they would look at

00:20traditional stocks. There's a stock, it's traded at a value, there's an order book, there's liquidity

00:25at certain price points that people are willing to buy and sell that asset for a certain amount

00:29on the secondary market or public market. And they take that, they multiply that price by the

00:34outstanding shares, and voila, you get a market cap for something. But this isn't really applicable

00:39to digital assets once speculation is gone. When there's real utility for these assets,

00:44the value is going to be in the protocol. This is something that Glenn Hutchins has said a couple

00:50different times at key points, and I would encourage you to go check out those videos.

00:54So what does that mean? If you had $1,000 XRP, it would be trillions of dollars in market cap.

01:02It would look absolutely ridiculous. And at $10,000, you have quadrillions as a market cap

01:08for XRP. So how is that possible? Well, the value of the asset is driven by the total transactions

01:16that are happening over the network or the protocol. What I could liken this to for most people that may

01:22have some relevance is imagine you sent a dollar every single time you sent an email. Imagine how

01:28many emails you send on a daily basis. Well, you do that through the email protocol, right? You could

01:36think about how many emails move daily. That market cap of the protocol, if it was moving value,

01:43would be astronomical. And that's how you should look at digital assets as well, because that's what

01:48they're doing. Email moves data packets, and it's the same thing for digital assets, but they're

01:53moving value from one place to another. So that is how the market cap of something like an XRP or an

02:02XLM or an HBAR could be astronomically higher than the valuation of companies that we know today on the

02:07stock market. And if you had asked somebody, you know, 10 years ago, if there was ever going to be a

02:12trillion dollar company, they'd have laughed you out of wherever you were. They would have thought that

02:16was absolutely absurd. But now we have Google, Apple, Amazon, many of the Fortune 500 and FANG stocks that

02:24most people have invested in, NVIDIA, have multiple trillion dollar market caps. And those are going to

02:30be superseded by these assets that move across these networks that are transferring value from one

02:36location to another. So the next time somebody tells you that the market cap of a digital asset

02:43because of a certain price point that you mentioned is going to happen, or you think is possible, I would

02:47challenge that and just explain it the same way that I have here. I would explain to them that these

02:52are protocols and networks, and these assets are moving value. And at scale, it's the volume of those

02:59transactions and the value moving over the network that's going to drive the price of the token.

03:03And it is going to look ridiculous when people calculate it in market cap. I actually think that

03:08there's going to be something else, some other metric that these networks are valued by that looks

03:14at the liquidity of the asset that's moving the value rather than the market cap like you would

03:20value a stock. So I know that this is a question that I get often, and it's been a reoccurring question

03:26the entire time that I've been invested in digital assets. And it almost always comes up when I'm having

03:31a conversation with somebody that's very familiar with markets or TradFi and has made multiple

03:37investments. They do the math, and they're like, that doesn't seem like it would work. But it actually

03:42does if you think about it in this way, rather than traditional stock. If you do like this content,

03:47please like, subscribe, and we'll see you on the next one.

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