The Tumultuous Rise of Ripple's XRP

Ripple, the global settlement network operator for banks, recently released the XRP Markets report for Q1 2017 which analyzes the market activity in XRP, an independent digital asset native to the Ripple Consensus Ledger (RCL).

Like many other non-bitcoin cryptocurrencies, often referred to as altcoins, XRP enjoyed considerable gains since January 2017. Like many other cryptocurrencies, there was an inflow of funds from bitcoin, and incidentally, like many other cryptocurrencies, XRP witnessed the quintessential crypto pump and dump on April 2 when the prices skyrocketed to as high as $0.069, almost thrice the price it traded a day before.

XRP Market Activity With Ripple’s Head of XRP Markets

Source: Coinmarketcap

In order to better understand XRP Market dynamics and Ripple’s perspective on XRP pricing, we had a brief conversation with Mr. Miguel Vias, Ripple’s Head of XRP Markets, who is probably best positioned to comment on the fluctuations in XRP over last quarter.

LTP: As per the report, BTC funds saw an inflow into XRP. Can't it be seen as a dependency on bitcoin, a highly volatile market? Does Ripple have any plans to de-couple XRP prices with BTC?

Miguel: Interestingly, the correlation between XRP and BTC is quite low, so I think about the relationship less like a dependency on BTC price action, and more as the most direct path for money to flow into XRP markets. Because XRP has relatively fewer fiat listings, the entry at the moment is BTC, regardless of what its price does. So when there is positive XRP news, the market is likely to move into XRP from BTC. As more XRP fiat pairs are listed, and more payments transfer through XRP, there will be an increase in fiat liquidity and we should see the BTC flows relatively decrease.

LTP: As per the report, off-ledger activity for XRP has increased in 2017. Does Ripple have a plan to shield XRP from any "pump and dump" activities rampant on cryptocurrency exchanges?

Miguel: Erratic price activity is often a symptom of less than optimal liquidity. As markets mature, volume increases and volatility decreases as a direct result of that volume. So while we have no plans to actively dampen price movements, a direct consequence of our strategy to increase liquidity should be more stable markets.

LTP: Can you briefly elaborate on the aforementioned systematic markets operation program? Would love to understand how it works.

Miguel: Unfortunately, besides what I shared in the report, I can’t give too many details on that program at the moment.

LTP: Can you briefly elaborate on Ripple's future plans towards providing a viable alternative to SWIFT?

Miguel: I wouldn’t characterize it as “future” plans, as we currently provide a viable, and superior, alternative to SWIFT. Using Ripple’s solution, financial institutions can coordinate funds movement across multiple ledgers to remove all settlement risk and minimize delays in the payment process. Additionally, with Ripple’s bi-directional messaging, they can validate transactions before funds are transferred and confirm delivery of funds, ensuring straight through processing and negligible tracking and reconciliation effort. Lastly, as XRP liquidity grows, and Ripple fully integrates XRP support into its solution, financial institutions will be able to access on-demand liquidity, thus mitigating the dependency on nostro/vostro accounts.

The Tumultuous Rise of Ripple's XRP

LTP: In general, what are the mid to long-term price targets envisioned for XRP by Ripple? We don't need exact numbers, just an idea on the general sentiment would suffice.

Miguel: To be honest, I rarely think about the price. At this stage in the development of XRP, markets focusing too intently on price can be very distracting, internally and externally. Instead, I am squarely focused on helping companies around the globe solve their real time liquidity needs using XRP. By building XRP’s fiat liquidity, and making that liquidity available for payments, we ensure that XRP will become the institutional digital standard for international value transfer. From there, the price should take care of itself.

Ripple’s current stand which seeks to maximize XRP liquidity and its subsequent adoption without active engagement in price movements stands to be challenged not only by crypto “whales,” a discrete class of crypto-hoarders who make money by bringing about tectonic price shifts in cryptomarkets but also by a variety of Ponzi schemes which pump and dump coins on a rotation basis.

That being said, robust trading volumes and a large market capitalization has certainly provided some stability to XRP’s price over the last few days; however, as and when the overall crypto market expands from its current size of $30 billion (approx.), potential volatility risks might call for the company’s active involvement in XRP markets.

Aman Trivedi

Aman reads and writes about distributed ledger technologies and digital identity at MEDICI. He has been active in the financial technology consulting space for over two years, looking out for novel business models, markets, products and services.