Did Ripple’s Co-founder Sense the Fall and Withdrew His XRP Investment?

Exploring the possible reasons behind Ripple co-founder Jed McCaleb selling off his XRP investment.

Analysis by blockchain monitor Whale Alert suggests that Ripple co-founder Jed McCaleb sold off more than one billion XRP between 2014 and 2019. Whale Alert also estimated that McCaleb has another 4.7 billion XRP left to sell, equating to around 5% of the total supply. At today's prices, the hoard is worth more than one billion U.S. dollars, dwarfing the $135 million Whale Alert estimates he has made via XRP sales to date.

McCaleb sold another 19 million, or $4.13 million worth last month and Whale Alert believes the rate may increase this year as the agreements limiting his XRP sales expire. McCaleb is a key figure in cryptocurrency's history, having created the Mt Gox exchange and co-founded Stellar (XLM). He also co-founded OpenCoin in 2012, which later became Ripple, and was allocated 9.5 billion XRP when the 100 billion supply was pre-mined. This large share of the supply has proved to be controversial over the years. The XRP price plunged 40% in the 24 hours after he announced his intention to sell all his holdings in 2014. He then negotiated a seven-year agreement with Ripple that limited monthly and annual sales. The agreement allows McCaleb to sell one billion XRP in the sixth year of the agreement and two billion XRP in the seventh. Whale Alert said by their count we are now in year seven. "The post is from 2014, so if you take that as year 1, then it should end in 2020 somewhere," they explained. However, details are sketchy and others believe that it is year six into the deal. Following a lawsuit by Ripple in 2016 alleging he'd violated the deal, an amended agreement put a daily cap on sales, which is currently set at 1.5% of XRP's daily volume. Whale Alert concluded its analysis by cautioning there are billions more XRP out there waiting to be sold.

McCaleb's sale of XRP tokens has continued into the later months as well. Ripple's price surged briefly over the positive news reports about the launch of a new product that uses XRP. If xRapid, the new product, gains traction with banks, then it will increase XRP's liquidity and valuation in cryptocurrency markets. But the news boost lasted only over the weekend and the world's third-most valuable cryptocurrency token has shed as much as 40% of its gains since last time.

McCaleb's family and a donor-advised fund owned by McCaleb own about 7.3% of the total XRP, according to the WSJ report. His personal holdings, including that of his family, amount to 5.3 billion XRP. Per the terms of his original agreement, McCaleb was restricted to a daily cap of XRP token sales. But the daily limits were revised to a percentage of total XRP trading volume on a given day in 2016.  XRP's rising valuation has boosted the personal fortunes of the company's founders and filled its parent company's coffers. Since the increase in XRP price, Ripple Labs has stepped up its investment in outside ventures. It has also started a venture fund to invest in cryptocurrency- and blockchain-related startups. McCaleb's Stellar blockchain uses the same technology as Ripple but is focused on emerging markets and nonprofits. It recently announced a partnership with IBM and launched a stablecoin that uses its blockchain.

XRP's lawsuit with the U.S. Securities and Exchange Commission regarding whether or not XRP is actually a securities asset rather than a form of digital currency continues to progress slowly with resolution now expected in early 2023. Until then, most major cryptocurrency exchanges have delisted XRP from their respective trading platforms, except for Binance and Kucoin.