What impact will Ripple’s AMMs Bet have on the price of XRP?
Ripple CTO, David Schwartz, has sparked discussions about the potential impact of Automated Market Makers (AMMs) on the XRP Ledger (XRPL). Despite concerns about a potential drop in XRP prices, Schwartz maintains a positive outlook and emphasizes the resilience of the cryptocurrency.
In response to inquiries from Uptownsaul, a prominent figure in the XRP community, Schwartz discusses the upcoming launch of a feature designed to address XRP’s price fluctuations. He recognizes the transformative potential of AMMs and expects a shift in trading strategies. He also anticipates new opportunities such as arbitrage on the XRPL DEX and participation in continuous auctions.
While Schwartz acknowledges that volatility harvesting can reduce volatility in theory, he does not believe that AMMs on the XRPL DEX will significantly decrease XRP price volatility in the near future. He explains that the trading activity on the DEX is relatively small compared to centralized exchanges and other platforms, describing it as a “drop in the XRP trading ocean.”
Schwartz outlines Ripple’s plan to leverage AMMs for institutional payments, taking advantage of the liquidity they provide on the DEX to facilitate smoother transactions. Although institutional payments were not the primary focus, Schwartz views them as a positive side effect.
He acknowledges the challenges faced during the initial stages of AMM integration on the XRP Ledger, including the withdrawal of support from key validators due to a discovered bug. Despite setbacks, Schwartz remains optimistic and calls for a revised proposal to address concerns within the XRPL community.
Interestingly, XRP’s price has remained stable, currently trading at $0.5389 with a modest 1.24% increase in the last month. This is in contrast to major cryptocurrencies like Bitcoin and Ethereum, which have experienced significant surges. As Ripple prepares to introduce the AMM feature, there is anticipation that XRP’s stability will continue.
The planned amendment aims to introduce liquidity pools to the XRPL, promoting decentralized trading and liquidity provision similar to leading DeFi platforms. Ripple’s strategic moves and Schwartz’s insights position XRP as a frontrunner in providing innovative solutions to market challenges.