McCaleb ramps-up XRP sales. Does it matter?

by | Apr 9, 2020

Jed McCaleb is an American programmer and entrepreneur. He is a co-founder and the CTO of Stellar. Prior to co-founding Stellar, McCaleb founded the XRP ledger and served as the CTO of Ripple until 2013. McCaleb is also known for creating the Mt. Gox, and the peer-to-peer eDonkey and Overnet networks as well as the eDonkey2000 application (source: Wikipedia).

XRP and Ripple creation

The initial architects of the XRP Ledger were Jed McCaleb, Arthur Britto, and David Schwartz. A few iterations in they approached Chris Larsen to handle the business side of things. Chris Larsen and Jed McCaleb formed Ripple the company in 2012, originally called OpenCoin. Out of the 100 billion XRP that were created at the XRP genesis block 20 billion went to the founders of XRP and the rest were given to Ripple to manage.

Falling out

After a falling out McCaleb left Ripple in 2013. At the time, he was holding 9 billion XRP, the amount he received for founding Ripple. In 2014, Ripple struck a deal with Jed in regards to the amount of XRP he could sell, in order to protect the market from huge dumps.
Jed allegedly broke the terms of the deal and was involved in a legal dispute with Ripple for a while. Bitstamp froze 100 million XRP that family members of Jed allegedly tried to sell circumventing the deal with Ripple.

In February 2016, a new deal was struck. The key points of the deal were:

  • Jed will donate 2 billion XRP to a charitable donor-advised fund (“DAF”) of his choice. The same limits are placed on the ability of the charity to sell the XRP as are placed on Jed’s ability to sell his remaining XRP.
  • All of Jed and his children’s remaining XRP, approximately 5.3 billion XRP (at the time of the settlement), will be placed in a custody account at Ripple. While Jed retains full title and ownership of his remaining XRP, Ripple will control the release of his XRP in a manner consistent with the settlement agreement. Specifically, Jed will be allowed to sell his remaining XRP in the following manner: – for the first year of the agreement, Jed and the DAF will be able to collectively sell 0.5 percent of the Average Daily Volume of XRP for each day of the week, including weekends and holidays. – for the second and third years of this agreement, Jed and the DAF will be able to collectively sell for each day of the week 0.75 percent of the Average Daily Volume. – for the fourth year of the agreement, Jed and the DAF will be able to collectively sell for each day of the week 1.0 percent of the Average Daily Volume. – for any time after the fourth year of the agreement, for each day of the week, Jed and the DAF will be able to sell 1.5 percent of the Average Daily Volume.

McCaleb claimed that that was a victory for him. Ripple has been in control of Jed’s XRP since then, releasing it according to the deal. His XRP has been held in 4 accounts that we know off. The first one holds the most XRP. The second one is used to load the third. The third one is used to load a bitstamp account for sales (the fourth account). Jed’s sales get executed on the XRPL Dex (decentralized exchange) and usually, the same amount of XRP gets sold all through the week, from Sunday to Saturday.

1 rDbWJ9C7uExThZYAwV8m6LsZ5YSX3sa6US 4.439B
2 r4LxkCUXYTCUgwquN3BnsUxFacoVLjGFyF 9.720M
3 rEhKZcz5Ndjm9BzZmmKrtvhXPnSWByssDv 58.572M

Jed’s selling activity

Jed’s sales have been pretty consistent the past few years with the occasional break. A pause of selling in 2019 for 5 months was allegedly made to allow for the charitable DAF to sell XRP instead of Jed.

As shown in the graph above, McCaleb’s selling activity has ramped up since mid-February, sometimes reaching an all-time high of 3.69 million XRP per day. This is no coincidence since the new deal between Ripple and McCaleb was struck in February 2016. This means that the fourth year has gone by and McCaleb is now allowed to sell 1.5% of the average daily volume. As per the agreement, this is the maximum percentage of the average daily volume he is allowed to sell. The only other factor that can affect his sales is the volume of XRP traded.

Even though CoinMarketCap (CMC) data can’t be fully trusted, it does give an indication of the XRP volume.

As shown above, there’s been an increase in the volume of XRP since early February. As more utility kicks in and volume increases, Jed’s sales could increase but is that a bad thing?

Having a past employee that is part of a rival party holding 4.5% of the total supply, is probably something other XRPL stakeholders would rather avoid. The sooner Jed’s XRP goes away, the better for XRP. At the same time, there doesn’t seem to be a correlation between the price of XRP and McCaleb’s selling activity.

According to this graph, even though the selling activity significantly increased after March 22nd, the price of XRP has increased from $0.155 to $0.20. On average, McCaleb has sold 1.4 million XRP per day during 2020 so far. At this rate, approximately 500 million will be sold in a year and it will take 9 years for the holdings to get depleted. If we estimate the average XRP sold per day since the increase in mid-February, it amounts to 2 million XRP per day. That will be 730 million XRP in a year with a little more than 6 years for McCaleb’s holdings to go to zero.

Whatever the case, Jed’s selling activity is conducted in a coordinated and monitored way, ensuring that it does not affect the price of XRP. The sooner the funds get depleted, the better for XRP.

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