The true, or actual, market capitalization of XRP and the token’s circulating supply is significantly lower than what current financial data sources have been reporting, according to estimates from Messari, a leading crypto market analytics firm.

Data from CoinMarketCap and Ripple Labs (the American fintech firm that manages the development of XRP) shows that XRP’s total circulating supply is pegged at around 41 billion tokens. However, Messari’s analysts have published a report in which they noted that 19.2 billion XRP “may be illiquid or subject to significant selling restrictions.”

McCaleb And Ripple Labs Have Legally Binding Agreement Over 6.7 Billion XRP

Messari’s report claims that nearly 20 billion XRP tokens are tied to daily trading volume, and that Ripple co-founder, Jed McCaleb (now focused on the Stellar project) holds “at least 6.7 billion XRP” that are subject to a legally-binding agreement between him and Ripple Labs. Additionally, analysts at Messari have determined that XRP’s circulating supply includes 5.9 billion tokens that were pledged by Ripple co-founder Chris Larsen to RippleWorks. According to Crunchbase, RippleWorks is a California-based non-profit organization that helps “startups and technology experts with social ventures around the world to jointly conquer scaling challenges.”

Data from Crunchbase shows that RippleWorks has received $60 million in total funding, however the organization’s management claims the initial funding amount has not yet been delivered. Significantly, Messari’s researchers have identified at least 2.5 billion XRP that are currently under RippleWorks’ management. These funds, Messari alleges, are also subject to certain trading restrictions.

“Direct Disclosures” Required From Ripple To Accurately Track XRP Supply

There may have also been about 4.1 billion XRP that were allegedly sold through XRP II, Ripple Labs’ money-services division, which are currently subject to trading restrictions. Notably, Messari’s report concluded that “it is impossible to track the magnitude of this illiquidity without direct disclosures from Ripple [Labs], so we use a reasonable estimate.” In total, Messari’s analysts estimate that well over $6 billion of XRP’s market capitalization is “likely overstated.”

Soon after Messari released its report, a representative from Ripple Labs told Coindesk:

Not only does this report contain several inaccurate assumptions around lockups and selling restrictions, the entire report is based on an incorrect calculation of market cap. While decentralized digital assets like XRP are different from traditional equities, the term ‘market cap’ is always a very simple calculation: current price X total number of the asset = market capitalization.

According to Ripple’s representative:

That puts XRP’s current market cap at approximately $31 billion. We believe that any other calculation of market capitalization for XRP is not a clear representation of the truth.

Meanwhile, Messari states in its report:

In reality, this estimate may prove to be conservative, as they belie XRP trading volumes which have consistently fallen well below that of EOS and Litecoin, two cryptoassets whose current referenced market caps are a mere 17% and 15% of XRP’s, respectively. In addition, we believe the actual amount of ‘restricted’ XRP in distributions to investors, banking partners, and team members may be significantly higher than our initial estimates reflect.

Ripple Labs Publishes Q4 2018 Report

Messari’s report further noted that Ripple Labs has not been transparent about their token issuance process as they had “not shared the methodology or reference exchange data” used to determine XRP’s trading volume. This, Messari’s research team alleges is a critical data point that may be the reason why selling restrictions have been imposed on the XRP token. Moreover, Messari estimates that over “99% of XRP trading volume” might be coming from exchanges located outside the US.

Messari also claims that many of the overseas exchanges where XRP is being traded have been “suspected of wash trading.” On Thursday (January 24th), Ripple Labs published its Q4 2018 report, which mentioned that average XRP daily trading volume was about $585 million. The American fintech notably sold $88.88 million programatically during the final quarter of 2018. During Q3 2018, Ripple only sold $65.27 million programmatically. “Institutional direct sales” of XRP accounted for $40.15 million, a sizable drop from $98.06 million recorded in Q3 2018.