Key Insights
- XRP’s burn rate has drastically reduced, with only 163 tokens burned in a single day as of September 21.
- XRP’s lack of a protocol-driven burn mechanism limits its ability to reduce supply and create scarcity.
- XRP faces downward price pressure, with key support levels at $2.99 and $2.83 that must hold to avoid further declines.
XRP’s burn rate has seen a significant decline in recent months, leaving some to question its long-term sustainability. While other tokens like Shiba Inu and Ethereum have incorporated burn mechanisms to reduce supply and drive scarcity, XRP has followed a different path. Its burn mechanism is solely tied to transaction fees, with a portion of each fee being permanently removed from circulation. However, data shows that the number of XRP burned has sharply decreased, suggesting a weakening of the token’s scarcity argument.
XRP’s transaction fees are typically minimal, often under a penny. While the fees are burned once transactions are completed, this mechanism has not been sufficient to make a meaningful impact on the token’s overall supply. Over the past three months, the quantity of XRP burned has sharply reduced, with only 163 XRP being burned in a single day as of September 21. This sharp decline contrasts with the peaks seen in early August when transaction activity spiked.
No Protocol-Level Solution to Accelerate Burns
Unlike Ethereum, which implemented EIP-1559 to burn a portion of transaction fees, or Shiba Inu, which relies on community-driven efforts to destroy tokens, XRP lacks such protocols or community-backed solutions to accelerate its burn rate. Consequently, the decrease in the burn rate has drawn attention to XRP’s inability to reduce its circulating supply in any significant way. This limits its potential to generate scarcity-driven growth.
The lack of a proper burn mechanism leaves XRP’s price largely dependent on external factors. While institutional adoption or speculative interest could drive price growth, the absence of a reduction in supply through burns makes it difficult to predict any substantial price increases. XRP remains constrained by its large circulating supply, which is currently close to 60 billion tokens. Without a significant shift in how the XRP ecosystem operates or a major increase in on-chain utility, the long-term prospects for XRP remain unclear.
XRP Faces Critical Support Levels
Adding to the uncertainty, XRP’s price is currently testing critical support levels. The token is trading within a downward channel, with key support points at $2.99 and $2.83. If XRP fails to hold these levels, it may face further downward pressure. As the token grapples with these technical challenges, its argument for scarcity-driven price growth becomes less convincing.
