Ripple’s Schwartz Raises Doubts About Immediate Impact of AMMs on XRP Price
David Schwartz, Chief Technology Officer of Ripple, recently challenged the notion that Automated Market Makers (AMMs) on the XRP Ledger (XRPL) would immediately cause a drop in the price of XRP. Schwartz believes that AMMs will not have a significant impact on XRP in the short term, despite their potential to reduce volatility through methods such as volatility harvesting and increased liquidity provision.
In relation to this, David Schwartz has expressed his opinion on the upcoming launch of a new feature aimed at addressing XRP’s price fluctuations. In response to inquiries from Uptownsaul, a prominent figure in the XRP community, Schwartz acknowledged the potential of AMMs to reshape trading strategies. While he recognized that AMMs may change current approaches, he also highlighted the new opportunities they could bring, such as arbitrage on the XRPL DEX and participation in continuous auctions.
Schwartz also discussed Ripple’s plan to utilize AMMs for institutional payments, leveraging the liquidity offered by AMMs on the DEX (Decentralized Exchange) to facilitate larger transactions. Theoretically, this approach could help stabilize market volatility by increasing liquidity on the XRPL. However, Schwartz clarified that the primary goal in creating the AMM feature was not to facilitate institutional payments, although they could serve as a positive side effect.
He pointed out that the trading volume on the XRPL DEX is relatively small compared to centralized exchanges and other platforms, referring to it as a “drop in the XRP trading ocean.” Despite his optimism, the initial implementation of the AMM feature faced a setback as key validators withdrew their support due to a bug that slowed down the process. This setback has raised concerns within the XRPL community and calls for a revised proposal.
Interestingly, while other cryptocurrencies like Bitcoin and Ethereum have experienced significant price surges, XRP has remained relatively stable. Some speculate that it is behaving like a stablecoin, although there is no evidence to suggest that Ripple is responsible for this. In the past month, XRP has only increased by 1.24%, while Bitcoin has jumped by 22.76% and Ethereum has risen by 36.91%. With the introduction of the AMM feature by Ripple in the near future, there are concerns that XRP’s price could become even less volatile.
The proposed amendment aims to introduce liquidity pools to the XRPL, enabling decentralized trading and liquidity provision similar to leading DeFi platforms.