A Longer Bull Market, XRP Freeing Liquidity, and the Future of the SDR

Economics, Premium POM16 Comments

Sometimes the process of answering the great questions of you readers provides the best opportunity to share information.  RJZ33 asked some very pointed and well phrased questions which prompted two very pointed and informative responses from me.  Both questions from RJZ33 were around the future role of SDR in a growing crypto environment, and how the Ripple XRP crypto asset could function in a larger international role and free up trillions in global liquidity.  This massive amount of liquidity could be just the thing to stave off a financial downward cycle and drive bull markets for decades.  So for those of you who may have been wondering where the SDR went, or what my take on the future of the crypto markets may be, below is the exchange between myself and RJZ33.

JC,
So, if your hypothesis is correct with the XRP, then where does the SDR fit into this whole agenda? You were such a big believer/promoter in the SDR/Bancor becoming the next step in the multilateral transformation. Maybe I misinterpreted? Regardless, I’m now kind of confused as to where this multilateral agenda is heading? If you can provide some additional thoughts and clarification, I would appreciate it. Thanks!

IMF has a high level advisory group working on FinTech. Ripple co-founder Chris Larson is on that advisory group. I have said in the past that the SDR would merge with characteristics of crypto assets and all would become one. This could be the case, but the more I learn about the potential liquidity which is freed and becomes available with banks using XRP, the more I realize that the role of the SDR may be relegated to providing support to struggling economies. XRP is a much more efficient and cost-effect solution for a supra sovereign asset which can be used by all nations. The SDR may remain as a safety net. But in time I even see all fiat and bonds evaporating under the spread of crypto assets.

Putting forward information and evidence that the SDR was being prepped to replace the USD as the international reserve asset doesn’t mean I was a promotor of it. It was simply the best option which was being supported by nations and international institutions. The imbalances in the system needed to be corrected one way or another. Needless to say that XRP can correct these imbalances, while expanding world wide liquidity in the trillions, on a much larger scale than the SDR ever could have. Maybe its not a coincidence that crypto assets exploded in 2017 after Trump took office.

Regardless, the old order is fading away. You can feel it. New institutions and wealth are emerging on the world scene. Some older ones will die and never come back. Some may re-invent themselves and find a new use for their old tools, such as the SDR. I’ll write more about XRP and its function of releasing trillions of locked up liquidity in another post. – JC

Thanks for the additional information JC. Much appreciated. And, my apologies for using the word “promoter”. It wasn’t accurate as you state. Believer was probably the better descriptor?
So, let’s assume that the XRP becomes a supra-sovereign asset. With only 100 billion mined, isn’t this a limitation? Also, how does the world’s liquidity expand in the trillions with a limited quantity asset and an asset that organically reduces? I just don’t see it? Unless you are saying that XRP and some of the other crypto-currencies co-exist with all fiat currencies providing this additional liquidity? That I can see. If you could elaborate once more, I’d appreciate it. Thanks again!

I will be writing an article to expand on this , but here is a brief look at it.

Consider all the banks around the world which interact with the SWIFT system. On any given day there is $27 trillion in liquidity locked up in these nostro accounts. SWIFT international payments from bank to bank take 3 to 5 business days. Bank A is required to hold money in nostro accounts in all countries in which it does business or needs to transfer money, say to Bank B. Both bank A and B need to hold liquidity in these accounts. This is money which is not available for anything else, like loans or other funding projects, and is subjected to exchange rate fluctuations in that 3 to 5 days. Along with the $27 trillion, there is another $2 to $3 trillion wasted every year in SWIFT transaction fees.

Now imagine the Ripple XCurrent network completing these international payment transfers in just seconds using XRapid. Bank A will exchange domestic fiat currency for XRP and transfer to Bank B in another country in seconds. Bank B converts the XRP into their own domestic currency. The whole process takes 2 to 3 seconds and costs just pennies. The liquidity in Bank A and Bank B is no longer locked up in nostro accounts and each banks exposure to any volatility in XRP is just seconds.

This is just banks and does not consider other payment companies and massive retail customers, such as Amazon, Uber, etc..

The growing demands on an ever shrinking 100 billion XRP will drive the price higher based on basic economic principles. The valuations of XRP will matter little to other domestic cryptos, which will likely evolve from the existing fiats. Each interaction will only take seconds and minimize the risk to any fluctuations. XRP will become the standard which the whole world will use to serve in a reserve capacity. Though the function of XRP is beyond anything which could have been dreamed up for the USD. It is evolving everything. Once you understand what XRP and XCurrent are, and how the growing list of partnerships are cornering the market, the potential for XRP appreciation is obvious.

Hope this helps.  – JC

This article is copyrighted by POM Media©2017. As Premium content permission is not given to be copied and re-posted.

JC Collins can be contacted at jcollins@philosophyofmetrics.com

16 Comments on “A Longer Bull Market, XRP Freeing Liquidity, and the Future of the SDR”

  1. Here is a nice accompanyment for this position JC. Of course in addition to your wonderful essay just before this post.

    “The fundamentals in the case of XRP are basically its long term probability of becoming a quasi-reserve currency (QRC) for financial institutions. We say “quasi” because we do not believe central banks will ever fully relinquish their local currencies without a fight. The path to QRC status will need to include demonstrable growth within the following areas:

    • Liquidity and market makers

    • Institutional derivatives that would allow banks to hedge foreign exchange exposure on their balance sheet

    • On-boarding financial institutions onto xCurrent + xRapid in both exotic and non-exotic corridors”

    https://hackernoon.com/xrp-the-dichotomy-of-ripple-2cce13d3241f

  2. I use to do quite a few domestic and international wires. The slow nature of the business was partly the result of monopoly I assumed; “Banker’s hours” and all that, which included no work on the weekend and all imaginable holidays off. Most headaches were the result of two situations however. The first is simple human error. The name or number on the account doesn’t quite match, or a cut-off is missed. The second is asset valuation issues. We may exit hedge fund A on Dec 31 and wish to move the $10 million to hedge fund B on Jan 2, but due to the vagaries of asset value at the close of business on Dec 31 we may not see the money for a month or more. Whatever the system, human error will persist (as will robbery), and the difficulty of establishing the value of any asset at a precise point in time will not go away. Surely some of the bank system’s slow and plodding time-frames reflect the accumulation of responses to those who successfully cheated the system in the past. Our love of novelty and our optimism allow us to overlook the downside to anything new. “This time it’s different” is the refrain of every fan of progress, but the torpid and self-important priestly class arises with every niche. Automation has its upside, but the downside is there as well, whether manifesting as entropy or criminal intent. Like the ongoing and evolving battle between predator and prey, progress is often a one step forward, one step back affair. With the possible exception of using quantum entanglement to ensure the secrecy of a message, I suspect that the primary value of a new technology like blockchain is to clear out the deadwood of bloated bank bureaucrats and replace them with eager to please technocrats, and not because it is some bullet proof, unhackable technology.

  3. JC,
    Get a load of this article…
    https://cointelegraph.com/news/why-imf-wants-to-enter-crypto-market-with-its-own-coin

    I think your hypothesis of the supra-sovereign SDR is still alive and well? Interesting…
    Additionally, as you mentioned in your 2 previous posts, the liquidity that digital coins is creating is enormous. As of last night, bitcoin alone has created $190B in market cap liquidity. Add the other hundreds of alternate coins and that liquidity grows even more. Since buy/sell profits are usually converted to local fiat currencies (and with the ForeEx markets waning from a leverage standpoint), the absorbing of excess fiat currencies being dumped by central banks, especially the USD, aligns well with the multilateral agenda, yes? The rising yield on US treasuries happening now also fits well into this story-line, I believe as well?
    So, do you think every sovereign country will start issuing digital currencies to replace their own? The dual ledgering of blockchain would certainly put a cap on counterfeiting, laundering and other malicious currency violations that are hard to control? So, digital yens, dollars, euros, francs, rubles, etc. start appearing? Then, have the digital SDR being the mechanism to convert every nations currency into their appropriate special drawing right from the IMF for debt load growth? Your thoughts on this possibility and timeline? And, based on the above, where does Ripple go from here?

  4. JC what do you make of this?: https://www.youtube.com/watch?v=GpWtd4kwjYI

    Basically banks saying they are not interested in the token (XRP), but just the ripple technology. Most want to have their own tokens so regulation/control/trust is easier.

    Does it make sense then to buy a bunch of tokens the banks may never use? I missed BTC, I missed ETH, XRP is the only affordable AND promising coin so far but looks like it could be a dud.

    1. Lots of different and misleading info out there. XRP will not be a dud. All banks will go along as the use of XRapid starts to flow through the path laid by XCurrent. Huge release of banks liquidity. Don’t worry about the noise and day to day swings. Hold long term and you will see. It’ll happen faster then people think.

  5. Thanks JC. Yeah for a moment I thought I’m seeing a pattern of so much negative info, must be some people interested in pushing the price down so they can buy-in low…but I’m a newbie with this so wasn’t sure. Appreciate your thoughts.

  6. “On February 23, 2018, cryptocurrency exchange Coinbase notified approximately 13,000 of its customers who are subject to the Internal Revenue Service Summons that the company must hand over information specific to their accounts. Coinbase expects to deliver the required documentation within the next three weeks.

    The Court’s order directs Coinbase to produce the following information and documents for customer accounts with at least the equivalent of $20,000 in any one transaction type (buy, sell, send, or receive) in any one year during the 2013 to 2015 period:”

    https://www.ethnews.com/coinbase-sends-irs-summons-notification-to-13-000-customers

    Do I understand this correctly? If one had any ONE transaction of $20k in a given year between 2013 to 2015 regardless of what the accumulated total transactions are for any given year? If so it seems they are looking for people who dumped lots of money in one transaction…like maybe international trade or purchasing real property with digital assets. Perhaps a form of inhibiting the integration of digital assets with real property thus an attempt at keeping the beast in command of the fiat world?

    1. Hey maybe this is Bitcoins response to the article above since it was the largest crypto in play between 2013 to 2015.

      “SegWit  — short for Segregated Witness  —  is an important soft fork upgrade to the Bitcoin network which makes transactions significantly more secure and efficient. When sending transactions with SeqWit, the main part of the transaction is effectively segregated from the portion which authorizes it. In turn, this makes Bitcoin transactions even more secure.

      Perhaps even more exciting to some is the fact that SeqWit also minimizes the size of individual transactions, which significantly improves the Bitcoin network’s total capacity.”

      http://bitcoinist.com/coinbase-rolls-segwit-support-gdax/

      Sounds like “minimizes the size of individual transactions” could be to bypass that $20k single purchase criteria doesn’t it? “Segregated Witness”. Could a central bank be considered a segregated witness of transactions?

  7. Very helpful information JC, thank you.

    I live in the United States and am trying to invest in order to help my 3 children pay for college, the oldest is 13. What would you recommend as the best investment for the next 5 years: XRP; a stock mutual fund; a short-term bond mutual fund; or something else?

    Thank you again for your good work.

  8. When I consider digital currencies I’m drawn to thoughts of ‘the internet of things,’ and what that all means. It gets a little scary when you learn how inventions of people that are working to create technologies that would be of great benefit to the world have had their inventions stolen by the biggest of thieves in control of the patent office and other government agencies. Then have their stolen technology weaponized to be used against instead of for the betterment of the world.

    I’ll attempt to include a link(you all know my record of correctly providing links is now up around 50/50, not bad. lol). This link is titled, “Something that You can do to restore the rule of law.” It is part of the “American Intelligence Media” group, smart people.

    Something that You can do to restore the rule of law
    https://youtu.be/p9R5SrRgB1Q

    The interview is between AIM member Douglas Gabriel aka Thomas Paine and Michael McKibben, CEO of Leader Technologies, Inc.. It in short form describes the 17 year legal battle between Leader tech and the Gov/IBM. The result of this battle could well put a dent if not a wench into the working gears of the Gov(patent office)/IBM cabal. Time will tell. but with P Trump’s attempts to return our nation to the rule of law, I feel encouraged.

    How I manage to relate this to JC’s informative post is perhaps tenuous at best. I see the competition between Ripple and IBM as healthy for much the same reasons as JC. So if Leader Tech is successful in main or part of it’s suit, I believe it could give Ripple some advantage even if just slight.

    Look at me, 2 weeks ago I did not know the dif between a exchange and a coin. Now I’m waiting for payday, so I can purchase XRP without a bank account. It is fun, will XRP be at $.70 or $1.20 come Mar 2, 2018? We will see, am I having fun yet? Hell yes, thanks POM.

    PTM

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