10th August 2023 > > XRP (Ripple).

tl;dr

Ignore the ridiculous price claims for XRP. That’s not the real world.

Market Snap

Market Wrap

Two breaches of $30k to the upside certainly caught my interest but it seems that we have a wall of sellers at $30k and a wall of buyers at $29k. We remain rangebound.

Occasional Series – My MP

Not content with being suspended from the Labour Party for being racist, my MP has disgraced herself again.

With an overwhelming majority for three decades and more I suspect she will remain my MP until she retires.

I will never vote for her divisive, aggressive, hateful, victimhood approach to life, as well as her hypocrisy (private schools anyone?) but I respect that the borough of Hackney wants Abbot to be our representative, even if she does drink gin and tonic whilst going about her daily work.

Even so, every time I write to her to ask for a meeting to discuss my concerns, I get no response.

I do wonder why that might be.

Curious Cryptos’ Commentary – XRP (Ripple)

Much has been made of Ripple Labs becoming a member of ISDA (International Swaps and Derivatives Association). ISDA is an august body, whose primary focus and function is to enable market participants to agree to common sets of rules regarding the documentation of OTC (over the counter) swaps and derivatives. It excels at this, as its advisors, movers, and shakers, are all well remunerated individuals of a business, legal, and compliance background working for investment banks. I have seen it working up close, and boy, does it do a good job.

There is no doubt that Ripple Labs joining this club is good for Ripple Labs and one hopes that this will also be good for XRP, but not necessarily to the extent of some of the extreme price predictions I have seen.

…

Some over-enthusiastic commentators have got, well, over-enthused by the statistic that the derivatives market has a notional of $1.2 QUADRILLION.

All derivatives are leveraged.

Theoretically you could buy a $10mm out-of-the-money call on BTC at, say, a $3mm strike for peanuts or less. Cash at-risk would-be peanuts or less, not $10mm, not for the buyer, not even for the seller. You can buy $10mm of investment grade 5 year CDS for about a point a year so $500k of premiums. Meanwhile, as unhedged derivatives are in no-one’s interests (except at the margins), that exposure will have been hedged with either slightly more or slightly less than $500k of premiums. Total capital at risk for $10mm of notional? Even less than peanuts (*).

So when you meet idiots (and you will know them when you are face to face with them) claiming that XRP will rally to nearly $2,000 based on processing 10% of the notional of the derivatives markets, tell them to go and buy a calculator that works.

And I say this whilst also noting that the CCC Treasury owns XRP.

…

(*) To be more accurate, for the market-maker the capital at risk is the difference between annual receipts and payments multiplied by the risk of default, which is CDS spread/(1-recovery assumption) at the time of the trade, but with added wrinkles including duration, the futures curve, and other minor irritants. With a full portfolio of trades at the same strike price (courtesy of ISDA) net capital at risk for the finance industry is precisely zero once transaction fees are paid. But you probably do not need to know these details to function as a normal human being.