What Drives XRP's Value? Bitwise Investment Report Outlines Three Key Components

WrathofKahneman (@WKahneman), a well-known figure in the cryptocurrency space, recently shared a segment from Bitwise's investment report on XRP. This highlights what he described as a “clear, succinct and relevant description” of what drives XRP's value.

A segment from Bitwise’s investment report on XRP has been shared by WrathofKahneman, a well-known figure in the cryptocurrency space. The image showcases what Kahneman described as a “clear, succinct and relevant description” of what drives XRP’s value.

The three central components highlighted by the report are transaction fees and burning, spam prevention via reserve requirements, and XRP’s role as a bridge currency and liquidity reserve.

The Bitwise report explains that every transaction on the XRP Ledger, such as sending, receiving, or exchanging XRP, incurs a small fee of approximately 0.00001 XRP, which is permanently removed from circulation. As of January 2025, over 13.46 million XRP have been burned, reducing the total supply to around 99.99 billion.

While this mechanism might appear to reduce the supply slowly, Bitwise argues it becomes significantly more impactful at scale. For instance, a 100x increase in transaction volume, which the report acknowledges is a possibility, would lead to the removal of 0.75% of the total XRP supply annually, potentially influencing long-term valuation.

Shiba Inu is a notable example of a digital asset that has grown because of consistent and aggressive token burns.

This report suggests that XRP could benefit significantly from this strategy, especially in comparison to Bitcoin, which does not have a burning mechanism and instead relies on transaction fees to be paid in varying amounts of dust to miners.