Last week, Ripple automatically released 3.28 billion XRP tokens from the escrow account, causing concerns about a potential dump. However, these concerns are completely unfounded, and whales took the opportunity to consolidate their holdings.
No reason was confirmed to be concerning for the long-term health of XRP. The escrow function has been operating for years and is designed to stabilize the token market. XRP has been returned.
Explanation of the XRP Escrow Incident
On the surface, Ripple seems to be having a great moment right now. Although they lost in the appeals for the famous lawsuit with SEC, the Commission subsequently approved their largest requests.
This has encouraged more cash flow and increased prices, but there was a hurdle. Two days ago, Ripple unlocked 3.28 billion XRP from the escrow account, causing a bearish sentiment.
Bill Morgan, a famous crypto lawyer and analyst, explained why this should not have a long-term impact on the price:
Basically, the community was concerned that Ripple was releasing XRP from escrow to conduct a large sale. Therefore, a story was spread that tokens needed to be sold as soon as possible to avoid damage. However, this is not rational for several reasons.
First, Ripple's CEO, Brad Garlinghouse, supported the XRP escrow mechanism over seven years ago. This system aims to ensure predictable supply and market stability; the SEC even praised its achievements.
By keeping these tokens locked, Ripple maintains an additional tool to prevent catastrophic economic situations.
It seems strange to completely abandon that plan while Ripple is performing well. Even if Garlinghouse intentionally wanted to disrupt a successful program, now would be a strange time to do so.
Moreover, similar XRP escrow unlocks typically occur automatically at predetermined times. Since the rumor spread, Ripple has returned these tokens to the escrow account.
In other words, this escrow incident does not affect XRP's price in the long term. Some traders may have pushed this story to buy tokens at higher prices, while XRP whales significantly increased their holdings during the dump rumor:
However, the entire incident seems to be just a social media drama. Traders should be careful about believing exaggerated statements and unverified information, especially if they demand immediate action.
