Ripple is now a Tsunami!

Just like that, Ripple's market cap now exceeds that of Bitcoin. There are a lot of people asking just what the heck is going on, and of course, trying to figure out if this is just another digital currency bubble.

Taking into consideration the total number of Ripples (XRP), that is, 100 billion, and the current exchange rate of approximately 70 XRP/USD, the XRP market cap is $1.43 billion USD. Bitcoin's market cap is currently $1.30 billion USD.

Clearly the XRP exchange rate has been influenced by the limited supply of XRP. The question is, how many are actually "floating" and how many have been locked away by OpenCoin and the founders?


We do know that the founders have retained 20 billion XRP, and that OpenCoin controls 80 billion XRP. Of that 80 billion, 50 billion are being "given away," though how that is happening is a bit of an unknown. It's likely that giveaways like the one we saw on the bitcointalk.org forum are the exception and not the rule. OpenCoin is probably paying developers in large lots of XRP to help build Ripple's infrastructure and applications.

Six days ago, someone put together a spreadsheet that lists all non-zero Ripple accounts and their XRP holdings. From this list, we can make some educated guesses:

There are 99.25 billion XRP in the top 55 accounts, with the smallest one holding 40 million XRP. These are likely OpenCoin holdings or those of major investors. We can safely assume that none of these coins are in circulation.

There are another 17 accounts with exactly 10 million XRP that, again, are not likely in circulation. That brings the total number of "institutionally held" XRP to 99.42 billion.

The total number of XRP that are actually being bought and sold right now is therefore in the 500 million range. At 70 XRP to the USD, they would be worth just over $7 million USD, a realistic estimate of how much fiat and BTC has been deposited into Ripple.

Account number nine on the spreadsheet is of great interest, as it appears as one of the nine billion XRP accounts, but one that has been drawn down by 1.421 billion XRP. What is this account being used for? Perhaps for actual giveaways, or for selling Ripples to re-sellers such as BitStamp or xrptrader.com.

Sources tell me that, in the same vein as what has been happening with Bitcoin, Chinese investors have shown great interest in Ripple, and are responsible for a non-trivial fraction of the recent rise in XRP valuation.

So what is Ripple actually worth? As a protocol, it has Bitcoin beat hands down. Remember that most merchants do not accept Bitcoin directly, instead, they use services like BitPay to instantly convert Bitcoins to fiat. A good portion of Bitcoin's utility is as a protocol, not as a store of value. We will probably see much of Bitcoin's protocol-driven business move into Ripple as additional gateways, like the soon-to-be open Kraken, come online. If Ripple's "Federation Protocol" gains traction, we could very easily see a market cap in excess of $10 billion USD within a year.

Remember that Ripple's key investors have connections to PayPal and Dwolla, and will want to bring them on as Ripple Gateways. Such a move would boost Ripple's valuation well into the stratosphere, leaving Bitcoin behind as a beta-version afterthought.

Expect to see some interesting discussion, debate, and hopefully some big revelations at this year's Ripple... err... Bitcoin Conference in San Jose in two weeks. With the drama surrounding CoinBase and MtGox, and the explosion of interest in Ripple, the timing couldn't be better.

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Bitcoin: $100 by the End of 2013?

Wow, what a week. Reddit took the leap and is now accepting Bitcoin payments, the market took a 20% dip and bounced back like it never happened, and the general buzz around Bitcoin is nothing like the community has ever seen before.

The Bitcoin market cap is just moments away from hitting $300,000,000, and the chart is starting to make the June 2011 bubble look like a speed bump:

Bitcoin Market Cap (Chart courtesy of blockchain.info)

Looking at Bitcoin mining, the first ASICs from Avalon and ASICMiner are now online, and at some point next week Butterfly Labs will most likely be shipping their long-awaited product to the lucky miners who threw down their money last summer.

The number of Bitcoin projects on the go is impossible to measure, as most developers are rather secretive, but I can quote one anonymous source as saying, "if I told you how many major projects I was aware of, your mind would explode." I'm not sure if that means four to six, or ten to twenty, but there are definitely a lot of enthusiastic developers mashing away at keyboards as we speak.

So, with that in mind, let's take a look at the future, shall we?

The Next Six Months (Original chart courtesy of bitcoinx.com)

What I've done here is added six months onto this chart (click for full-size), showing where I believe the exchange rate and mining difficulty will take us over the next half-year. Predicting mining difficulty at this scale was rather easy; it's going to go up, and quickly. A difficulty of seven million will easily be achieved by the first couple weeks of March, as thousands of chips are sent out by Butterfly Labs and the second batches from the other manufacturers begin coming online.

Predicting exchange rate is a different monster altogether. With the Reddit adoption, in essence an acknowledgement from a large corporation that accepting Bitcoins is risk-free, the way has been paved for other major businesses to sit down with the likes of BitPay, Coinbase, WalletBit, and OKPAY, and add Bitcoin to their list of acceptable forms of payment.

It used to be that accepting Bitcoin literally meant having a Bitcoin wallet and receiving Bitcoins. Now it's obvious, almost mainstream obvious, that you can pay a third party a nominal fee to convert those Bitcoins to fiat currency and, literally overnight, expand your customer base to the global market.

Now we're at a $300,000,000 market cap. As we approach a billion dollars and beyond, Bitcoin will become even more liquid, allowing the payment processors to lower their fees and increase the pressure on thre three archaic stalwarts: PayPal, Visa, and MasterCard.

So where do we go from here? How much is global, fraud-free, peer-to-peer, open-source digital cash worth to the global economy? 300 million dollars? A billion dollars? Ten billion? At ten billion dollars, a Bitcoin is worth $476 at full dilution (21 million coins). There are several niche publicly traded technology companies with market caps in the ten billion dollar range, but we're talking about a technology, Bitcoin, that could literally revolutionize global banking. What are the odds of Bitcoin being worth 15% of ten billion within six months? I would say that outcome is quite likely, and that's all my chart is showing.

The current "spike" to $28 is the equivalent to the spike to $10 that occurred before the June 2011 bubble. Assuming this is a similar "calm before the storm" situation, I predict we'll see mid-fifties by mid to late March, followed by a consolidation in the $40 range, and then an aggressive steady climb toward $100 by the end of 2013.

Again, I can't predict the future; nobody can, but at this point I can't see why such a useful technology that has already survived three years of endless attacks unscathed, will not receive massive adoption in the very near future, at first by business, and then subsequently by consumer. Most importantly, Bitcoin is a concept that is starting to go viral, and when things go viral on the Internet, they move quickly.

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Bitcoin: The $200 Million Currency, Once Again

On January 24th, Bitcoin broke through $19.00, a price not paid for a Bitcoin since July of 2011.

Over 24 hours, 160,000 Bitcoins traded hands on the Mt.Gox USD market alone, while traders attempted to seek out a new valuation for the increasingly popular digital currency. Trading has since settled down, with the price hovering around the $17 mark.

During the fast and furious trading, the overall market capitalization of Bitcoin topped $200,000,000 for a brief period of time, coming very close to hitting a new high previously set during the infamous bubble that occurred 18 months prior.

Are the recent highs just another bubble, or a bullish sign that Bitcoin has hit the tipping point? I would speculate that it's the latter, as overall activity in the community has picked up substantially. Indeed, one of the more successful Bitcoin businesses, BitPay, just announced they have successfully facilitated 10,000 Bitcoin merchant transactions, and now have a client list totaling 2400; clearly a positive indicator for the future of Bitcoin.

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