How can Ripple build Liquidity when Multi-National Banks, Hedge Funds, etc. Have Been Unsuccessful?

[jd2424]

If a pair like USD/CHF is currently considered illiquid, and no bank/Hedge fund/HFT Firm/etc has been successful in making it liquid, then what makes people think that Ripple can somehow make XRP/CHF liquid (or for that matter, any other currently illiquid pair)?

Said another way, if it were possible to create sustainable liquidity while maintaining profitability, wouldnt it already have been done by banks/hedgefunds/HFT/quant firms?

 

[Fnord]

"then what makes people think that Ripple can somehow make XRP/CHF liquid"

Ripple isn't somehow going to do it. They have a very detailed plan of exactly how.

[will4star]

2 hours ago, jd2424 said:

If a pair like USD/CHF is currently considered illiquid, and no bank/Hedge fund/HFT Firm/etc has been successful in making it liquid, then what makes people think that Ripple can somehow make XRP/CHF liquid (or for that matter, any other currently illiquid pair)?

Said another way, if it were possible to create sustainable liquidity while maintaining profitability, wouldnt it already have been done by banks/hedgefunds/HFT/quant firms?

 

It's tough to start with, for sure. But you can only achieve it by connecting as many different currency corridors to XRP.

XRP/CHF liquidity can be increased by people/corporations trying to move CHF to not only USD, but also any other currency that's connected. i.e. Anyone trying to move CHF -> JPY that goes via XRP, also increases the CHF-XRP liquidity, benefiting anyone trying to move CHF -> USD via XRP, and so on. The same is true going the other way -- This is where the beauty of a neutral, third party digital asset comes in. 
You may have to incentivize people to go via XRP to start with while there might not be huge cost saving benefits, but as more are added so liquidity grows naturally and it starts to snowball... 

Edited November 20, 2017 by will4star

[Kloppos]

3 hours ago, jd2424 said:

If a pair like USD/CHF is currently considered illiquid, and no bank/Hedge fund/HFT Firm/etc has been successful in making it liquid, then what makes people think that Ripple can somehow make XRP/CHF liquid (or for that matter, any other currently illiquid pair)?

Said another way, if it were possible to create sustainable liquidity while maintaining profitability, wouldnt it already have been done by banks/hedgefunds/HFT/quant firms?

 

I guess to keep it simple the big difference here is that with XRP you have to build liquidity only once per currency while in the normal world you have USD/CHF, EUR/CHF, INR/CHF, JPY/CHF etc. So banks, hedge funds and HFT firms can have their hands only in that many "baskets" per currency which means by CHF definitely EUR/CHF would be surely priority over USD/CHF as first.

The clue for XRP is that you dont need to deal with all those different pairs for the same currency (and not having for each currency pair a lot of extra accounts and blocked money), no you just build the liquidity with XRP/CHF and voila you are liquid with this currency world wide.

Obviously its not that simple, but I guess the point is clear which huge advantage XRP/CHF have over USD/CHF

[jcdenton]

Thanks for an interesting question. Thumbs up to the answers above and I'll tackle it from another angle as well: 

On 11/20/2017 at 9:15 PM, jd2424 said:

If a pair like USD/CHF is currently considered illiquid, and no bank/Hedge fund/HFT Firm/etc has been successful in making it liquid, then what makes people think that Ripple can somehow make XRP/CHF liquid (or for that matter, any other currently illiquid pair)?

Said another way, if it were possible to create sustainable liquidity while maintaining profitability, wouldnt it already have been done by banks/hedgefunds/HFT/quant firms?

The assumption here is that HFTs want to create liquidity -- they don't, they want to create profits.

But the issuer of the asset might want to create liquidity, so he could incentivize the market so that HFTs are able to enter it profitably and create liquidity as a byproduct. 

Thanks to its XRP holdings, Ripple is in a position to do that and finance it through the resulting appreciation of XRP. 

And it's venture backed, so it doesn't have to create profits every 4.7 milliseconds like an HFT does, it can just keep building the use case. 

On 11/20/2017 at 9:15 PM, jd2424 said:

sustainable liquidity

That's the longer term question. Ripple can keep up the volume rebates / accelerator programs etc. for quite some years. But ultimately, they'll need an increase in the underlying use case. 

The "Internet of Value" is not a marketing term, it's firmly baked into their business model and their long term success depends on it. 

The great news is that they're not building this tsunami alone. Far more powerful forces are already hell-bent on it. 

Today we saw the launch of SEPA instant payments. On the macro level, news like this and the Fed task force is the stuff that bulls are made of.