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Exchanges provide liquidity...riddle me this...

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When I place an order on an exchange, I either pick the price or market order.

How will xRapid work?  On Bittrex currently, there is $218 mm worth of sell orders.  If I'm an FI looking to move $250m via xRapid, what will determine the price the order is made at?  For example, would it be a market order of $250mm worth, virtually eating up all the open orders? or will there be some sort of pathfinding via other sources of liquidity, based on a pre-established bid price?

 

 

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My understanding is that all xRapid orders are market orders and for it to work there has to be enough liquidity. As it currently stands, there is no way we can process a payment as large as $250 M. For that to happen, the liquidity has to be an order of magnitude higher.

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This is why the depth of markets matters. Here is the current USD.Bitstamp market's depth.

Capture2.thumb.PNG.61ea772de5b77e46faf4e466ecb6152f.PNG

If you are doing a $600k payment from USD to EUR, through XRP...

1) You would be selling USD and buying XRP, so on the USD:XRP orderbook you would move the market price up to about a $1, chewing through all the Asks in between current market price of $0.55 to get the full $600k trough.

2) Move the XRP to Euro exchange...

You will be selling XRP and buying EUR, so looking at the depth on the Gatehub Euro orderbook  we see...

Capture2.thumb.PNG.e049d5a9f462cb6609ccc2f8a8700a1e.PNG

3) So you would be selling XRP and buying EUR, so on the EUR:XRP orderbook you would move the market price down to about a $0.40... or off the chart really, there is not enough liquidity in that orderbook to move $600k,  because you would be chewing through all the Bids in between current market price of $0.55 to get the full $600k trough, and this orderbook only shows $120k of liquidity or deapth on the Bid side.

My guess is that Ripple has "Market Makers" and "Liquidity Providers" who will help these markets grow in depth, in addition to the liquidity provided by Retail Trading activity. 

xRapid is an API integration at some level. So as a service, it has info on all the orderbooks on various exchanges, so I would think it would have the ability to break up a payment and route it through various exchanges at once, to find the cheapest liquidity or path for the full $600k payment. I have not seen any details on how they are getting this done, so if you have info please share.

Edited by KarmaCoverage

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xRapid will need deeper liquidity before it can process large transactions.

Price per coin higher than the current one would help.

One should also not forget that coins that are currently in escrow will gradually enter the market.

Other than that, I suppose that Ripple's philantropic endeavours are one way to increase circulation.

Let's not forget that building liquidity is a long process and probably the main challenge that remain for xRapid.
 

Edited by F6FNU

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3 hours ago, KarmaCoverage said:

This is why the depth of markets matters. Here is the current USD.Bitstamp market's depth.

Capture2.thumb.PNG.61ea772de5b77e46faf4e466ecb6152f.PNG

If you are doing a $600k payment from USD to EUR, through XRP...

1) You would be selling USD and buying XRP, so on the USD:XRP orderbook you would move the market price up to about a $1, chewing through all the Asks in between current market price of $0.55 to get the full $600k trough.

2) Move the XRP to Euro exchange...

You will be selling XRP and buying EUR, so looking at the depth on the Gatehub Euro orderbook  we see...

Capture2.thumb.PNG.e049d5a9f462cb6609ccc2f8a8700a1e.PNG

3) So you would be selling USD and buying XRP, so on the EUR:XRP orderbook you would move the market price down to about a $0.40... or off the chart really, there is not enough liquidity in that orderbook to move $600k,  because you would be chewing through all the Bsks in between current market price of $0.55 to get the full $600k trough, and this orderbook only shows $120k of liquidity or deapth on the Bid side.

My guess is that Ripple has "Market Makers" and "Liquidity Providers" who will help these markets grow in depth, in addition to the liquidity provided by Retail Trading activity. 

xRapid is an API integration at some level. So as a service, it has info on all the orderbooks on various exchanges, so I would think it would have the ability to break up a payment and route it through various exchanges at once, to find the cheapest liquidity or path for the full $600k payment. I have not seen any details on how they are getting this done, so if you have info please share.

Ripple will be very much aware of this, and my guess is that part of their plan is focussing on smaller transactions first (or limitting the amounts at the start, which might be also why they have broadened their clientbase besides banks), build liquidity and price increase (!) with that, which will attract more speculators, market makers and exchanges, and let bigger transactions come in at that moment, etc. With that it is (and always has been) a long term plan, yet my guess is it might get significantly steeper the comming months with RippleNet getting into motion.

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2 hours ago, pumpndump said:

Yep, that is the same question I posed coupled with why would banks trust "shady" crypto exchanges in the first place.

The definitive answer was, "Shut up Ripple will make it work!"

I'm quite sure, at least for the exchanges that Ripple has partnered with for the initial xRapid roll-out, that due-diligence has been done (via each exchange/party involved) to satisfy both the regulatory and security issues. 

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We must take into consideration that an amount of 250M is highly speculative. That would only be like once a day interbank clearing, but since XRP transfers the whole value in 4 secs, there is no need for once-a-day clearing at all.

To buy and sell XRP in any exchange for sums of 100k - 500k has very little effect on the price really. Bitfinex order books have no problem in handling these amounts, since as soon as any 100k is bought, bots will cover the "newly born" spread, which is just .1-.2 cents.

In the pic I added, there´s .04 USD spread on 7M XRP, and it never really goes that wide. Nobody buys 7M in one order if the spread is that wide, the transactions will be shared into smaller payments. There are actual people competing of all these incoming market orders and they try to make profit by acting as marketmakers in exchanges. If spread gets up to 2%, that would mean huge opportunities if someone could arbitrage that. 2% every 4 seconds would make trillions in just one year.

Nobody will be able to do that since when usage grows, more people want to get their share of the cake and more people start to offer XRP on exchanges.

Price go up, spread go down, liquidity go up, volatility go down! Capitalism at it´s best!

Each transaction can be handled individually, so most transactions will be in size of tens, if you just consider a regular household usage. Spread has very little effect.

For most corporate transactions the amounts per transaction are not millions either. 90% if not more of all companies in the world have less than 20 employees, and their average payment is probably sub 500 per transaction.

Spread has very little effect, and so does price of XRP. 

I have owned and ran cross-border businesses for more than 20 years and I fully understand the benefits of XRP.

The value is everything around the infrastructure, not just payments. The value is that you can change it to any currency, asset or commodity in 4 seconds, anytime and anywhere.

BITFINEXSPREAD.png

Edited by P3T3RIS

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This means you can handle surprisingly high payment volumes today as long as each payment value is low.

What does he mean here? So instead of trading 100M XRP in a single event, a bank should make a 1Million trade  but 100 different times?

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10 minutes ago, Dario_o said:

What does he mean here? So instead of trading 100M XRP in a single event, a bank should make a 1Million trade  but 100 different times?

Or if you are worried about spread,  10 million trades of 10 XRP each.

Whichever is cheaper then, spread vs transaction costs

Edited by P3T3RIS

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