Jump to content

If nobody holds xrp, who is going to sell and rebuy XRP?


Recommended Posts

12 minutes ago, Hodor said:

Am I in a parallel universe where the supply of XRP can increase? 

Does everybody have a goatee here?

evil_spock.jpg.fc9c402dda034ec460750ee88a893289.jpg

 

Read up on what supply means

https://en.wikipedia.org/wiki/Supply_(economics)

In economics, supply is the amount of something that firms, consumers, labourers, providers of financial assets, or other economic agents are willing to provide to the marketplace

So yes, the supply can "increase".

In case you still don't get it: If I'm HODLing my XRP, it's not on the marketplace

Edited by corak
Link to comment
Share on other sites

I guess we all speculate that xRapid use will increase the demand of XRP, and with the increased demand price will also appreciate. This is why we are here and this is the reason we bought XRPs.

The devil is in the details though.

My argument is (and @corak 's argument seems to be the same) that xRapid's direct use (i.e. the international transfers via xRapid) will not increase the price by itself.

To understand what can possibly happen to XRP's market price during the use of xRapid (in case of one imaginary transfer of 100USD for 100CHF if CHF=1USD) you can refer to below table. (copied here from my other post)

image.png.7766ef18ff8612e019cb405113a1b3da.png

These are the theoretical possibilities. However, if we agree that price is dictated by supply and demand, we can also agree, that when xRapid buys XRP for USD, XRP price increases, and when it sells XRP for CHF, XRP price decreases. (scenario 6) At least if the size of the transfer is big enough to move the price (let's say the transfer is for 1M USD, not just 100USD) and the order books on both sides have similar depths.

However, if this happens, this (slippage) can increase the cost of transfer to a level, where traditional transfer method is more cost effective.

Hence the need for liquidity.

And this is where speculation comes into the picture.

FIs, MMs, liquidity providers, institutional investors, banks, etc need to buy and hold XRP in the hope that it will be used (can be lent) in the future. The more customers are for xRapid, the less speculative holding XRP will become. But to start the system, some level of speculation will be needed from the FIs' side.

They also need to be sure that the price will not be too volatile (moreover, that it will continually increase), so the holding cost will be not too expensive. As xRapid use in itself will not increase the price, other use cases needed to be provided for XRP, that move the imagination of both retail and institutional investors. 

Is it a coincidence, that Ripple, led by a guy who prides himself on not spreading the peanut butter too thinly is now announcing that they will start exploring other use cases as well for XRP besides international remittance? Is it because the initial/main use case for XRP is all set, everything is right on track, so now Ripple can allocate their resources to the exploration of other use cases? Maybe. 

However, maybe it is to provide price support for XRP (by speculation for other use cases), so it is safer for the FIs to enter the game and buy/hold/lend XRP.

 

 

Link to comment
Share on other sites

Here's another way of looking at it.

"xRapid buys xrp from an LP on exchange 1 ( ask volume increases price).

xRapid sells xrp for asset needed ( bid volume lowers price),simultaneously someone is buying that xrp on the other end (market order) with the needed currencey ( ask volume increases price).

The first leg increases price, the last leg does not decrease it thanks to the wash out of bid and ask volume.

For every sell there is a buy on the other end. Its all a circle. XRP is already owned by someone, it just changes hands, and thats how value is determined. At which price it changes hands."

https://www.reddit.com/r/XRP/comments/8j6zms/xrapid_xrp_price_increasedecrease/

 

Link to comment
Share on other sites

 

12 minutes ago, XRPisVELOCITY said:

The first leg increases price, the last leg does not decrease it thanks to the wash out of bid and ask volume.

 

How is it possible that you think this situation is asymmetric?

 

There's a supply curve and a demand curve for XRP.

xRapid usage pushes both of them upwards the same amount. They still meet in the same place.

 

 

Edited by corak
Link to comment
Share on other sites

To settle this topic at least temporarily, one must do the following:

  1. Take ~50k usd on bitstamp, and ~50k usd worth of xrp on Bitso. Then execute 500 buys/sells of ~100 usd worth of xrp, inserting the needed delays between both exchanges (min. 3.5 second up to 3 minutes, as per demo info). Record the price change and fees incurred. 
  2. Do the same trades, but this time by buying XRP with MXN, and selling XRP for USD on Bitstamp. Record the price change and fees incurred. 
  3. This is the most important step, as it will most correctly resemble the actual use: Execute buys and sells from both directions, i.e. USD <->MXN, not necessarily in equal measures (depends on net outflow of capital through xRapid). Record the price change and fees. 
     

            Now the hardest part -> analyze the data. 

You can conduct the same experiment with lesser sums of money, however the bigger the amount is, the closer the picture would be to the adoption most here anticipate. 


 

Link to comment
Share on other sites

Easy for you guys to say it won't move price.  Just as easy to say it will move the price.  I still think this explanation on reddit is a good counter argument.  To say it's set in stone that xRapid usage Won't increase the price is not accurate.  We won't know until that day comes.

A financial institution connects directly to digital asset exchanges in both the originating and destination corridors. The originating currency is exchanged into XRP which provides the necessary liquidity to power the final payment, and then in seconds that XRP is exchanged into the destination currency in the second digital asset exchange.

https://ripple.com/insights/first-pilot-results-for-xrapid/

I re-read the convo and see you might want actual proof that xrapid sells for the same price on both legs, but Its not said directly anywhere. a lot of it is kept under wraps by NDA's. There are also two or three posts on xrp chat from David and other ripple employees explaining the process that xrapid and ILP will automate. Look at it this way:

When doing an xrapid transaction "manually" one would never sell the xrp bought on the first leg, for cheaper on the second, thats considered a loss. This is why we dont have massive use yet in pilots, or just one way use in areas that differ, we need a lot of volume in all corridors to increase arbitrage and even out the price everywhere. This will happen soon once the pilots of big companies go live ( this quarter) increasing volumes and more pairs to xrp. Until then companies will use xrapid in corridors where they can profit or break even, they aren't going to take a loss on a transaction.

Once again, even if they considered the process a benefit, and took a cent loss on small transactions, the second leg is a washout because market order sells always have a buyer on the other end instantaneously. Go complete a market order on an exchange ( a sale), you will see the bid volume you created, then the ask volume the person who bought it from you ( washout). The park of xrapid that will be increasing price of xrp is that original purchase which increases it on one exchange, not because its planned that way, because thats how markets work. Keep in mind there will be dozens of partners doing this simultaneously, and there is only so much xpr in circulation ( a large deal of it in circulation is not even for sale, I no mine isn't) this means market makers will need to purchase more xrp, further increasing price. It all comes down to simple supply and demand.

There are also several other ways price will increase. The more volume, the more market makers will enter the scene, which means the more xrp they will hold. The more companies use xrp, and receive xrp payments, the more they will start to use xvia and hold xrp. Xrapid increases price, I explained how previously, the same way price increases with buying and selling now ( most of the time people aren't selling at a loss).

https://www.reddit.com/r/XRP/comments/8j6zms/xrapid_xrp_price_increasedecrease/

 

Link to comment
Share on other sites

45 minutes ago, XRPisVELOCITY said:

There are also several other ways price will increase. The more volume, the more market makers will enter the scene, which means the more xrp they will hold.

Seems to me this is the most important variable... if/when XRP becomes the de facto "nostro/vostro account" for a large number of FIs, then it won't be "bought and sold", it will just be held (either by market makers or the FIs themselves) which takes it off the market, creating a sort of scarcity. 

Haven't we heard the phrase"locked/tied up in nostro/vostro" accounts  dozens or even hundreds of times? IMO this factor is what would lead the price higher.

Link to comment
Share on other sites

6 hours ago, Hodor said:

 

No.  Ripple doesn't suppress the price. 

 

https://fudbingo.com/ripple-wants-to-suppress-the-price

 

 

I wrote "suppress the XRP inflation". I never wrote "suppress the XRP price", let alone that Ripple was trying to do that. We both agree this is absurd. You missed my point thinking I was a basic FUDster. I am not...

Ripple will sell their XRPs released from escrow over the counter at the market price, which is a sale triggered when one strategic user wants to start using XRP (shock in aggregate demand matched 1 to 1 by the same shock in aggregate supply). This increase in circulating supply does not affect the market price... at least until all XRPs currently in escrow are in circulation or the monthly release is not enough to meet the demand shock, at which point the aggregate demand will (arguably) grow quicker than the supply, driving the prices up. All XRP holders are betting on that.

Questions for you: what is the impact of an increase of the aggregate supply on the inflation? And don't you agree that releasing XRPs from escrow is a shock to the aggregate supply?

What I wrote here is part of the same basic economics principles you highlighted. All you wrote was true, no question. But what I wrote here also is.

If you disagree, please let me know why. I would like to understand.

Edited by Guest
Trying to clarify my statements
Link to comment
Share on other sites

The Redit idea that the first buy is a rise and the later sell is a wash is bollocks.  If that's true then the first buy was someone's lowering sell.  It is actually symmetrical and circular and isn't kick-started by the magic 'first' buy.

XRapid is symmetrical and so to find a price mover you need to see if there are any asymmetries.  There are at least two that I can see...  I mentioned one earlier but no one spoke to it...  Transaction size.

If the buys are bulk and the sells are piecemeal then the price pressure is upward.  The bulk buys might come about because an FI wants to further save money by holding a stack of XRP (to be the initial provider of XRP and so get the 'buy' price of each transaction under their control as fee-less-to-them profit).

Another asymmetry is exchange and market maker fees.  I'm not sure how that plays out....

Lastly there is the arbitrage.  Assuming corridor flow is not perfectly balanced in both directions then eventually there is an arbitrage opportunity.  Whether that results in size asymmetries and how that will play out is also unclear to me.

Ripple have the answer....  if they haven't modelled this and run simulations then I will eat McAfees......       favourite McDonald's meal.

So Ripples confidence is what gives me confidence.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.