The recently published Hinman documents in the legal battle between Ripple Labs and the US Securities and Exchange Commission (SEC) have caused quite a stir and strengthened the XRP army’s belief that the fintech will prevail against the regulator. What has attracted little attention, however, are the documents and emails that Ripple has had to release.
One issue is of particular interest. Just recently, the “XRP buyback” theory hit the headlines once again. In recent days, there has been a lot of speculation about a possible buyback of 10 billion XRP tokens by Ripple Labs. However, Ripple’s Chief Technology Officer (CTO) David Schwartz was quick to put a stop to these speculations. In a clarifying tweet, Schwartz wrote:
We do sometimes buy XRP. But I don’t know of anything specific that this could be referring to. And there’s no official source mentioned.
Ripple Emails Reveal Musings About XRP Buybacks
Even though the XRP buyback theory (propagated by Valhil Capital’s CEO Jimmy Vallee) has been dismissed as absurd by Ripple executives several times in the past, recently released documents and emails reveal that the fintech company was considering XRP buybacks to prop up the price even shortly before the SEC lawsuit in June 2020.
In an email from Breanne Madigan, the VP Head of Global Institutions Markets at the time, she shared a presentation relating to XRP-O (On Demand Liquidity) supply concerns and the impact on the price. The presentation states that there are three possible narratives:
First, XRP supply, regardless of the source, has a similar impact on the market. Second, Ripple’s XRP supply has a greater impact on the market, possibly due to higher visibility. Third, Ripple theorizes that On-Demand Liquidity’s XRP supply has the greatest impact on the market, possibly due to higher visibility, lower neutral liquidity and wider spreads.
The third scenario is the most likely, according to the presentation, and also the reason why XRP has underperformed BTC since its halving in early May 2020. Ripple writes that XRP sales via XRP-O have led to negative pressure on XRP price. It also says that buybacks could directly dampen the impact of XRP-O sales.
In total, the fintech company sets up five potential buyback options for XRP-O, each with a one to three month pilot period. These are:
(a) Repurchase XRP via market makers (MMs) on multiple exchange
(b) Repurchase XRP directly from MMs
(c) Repurchase XRP on xxxxx via MMs
(d) Reduce XRPO volumes and divert/ channel them to traditionals ODL
(e) Stop XRPO altogether
Jimmy Valhil’s #XRP buyback theory is extremely controversial. BUT:
Recent #Ripple emails from the SEC lawsuit show: the company was considering buybacks in June ’20 (few months before lawsuit) to prop up XRP price.
— Jake Simmons (@realJakeSimmons) June 26, 2023
The recommendation of the creators of the presentation is option b) that Ripple buys back XRP directly from MMs (short-term plan). In the long term, the team recommended that Ripple sets up a new company and develops internal expertise.
What the plans would have become without the SEC complaint can only be speculated. However, the documents show that Ripple is definitely pondering about XRP buybacks (but probably not like Valhil theorizes).
A Stumbling Block For Ripple?
However, popular Twitter user @JayVTheGreat has also pointed out a negative revelation from Ripple’s emails. He writes: “Don’t fool yourself or let anyone fool you into thinking that #ripple wasn’t marketing #xrp to speculators/retail.”
He is referring to an email from Monica Long, the current general manager at Ripple. In the email, Long writes that:”it’s clear that we’re going to have to invest our near-term energy into attracting speculators.” The statement is critical in that Ripple has always denied advertising XRP as a speculative investment.
— Jay’V (@JayVTheGreat) June 25, 2023
At press time, the XRP price stood at $0.4827, consolidating below the key resistance zone around $0.50.
Featured image from iStock, chart from TradingView.com