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On Demand Liquidity - Really?


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As @Ripple has transitioned its language for XRP's xRapid to On Demand Liquidity or ODL,  I have searched for the best ways to monitor ODL and specifically liquidity.

This is the closest I have found to date: https://www.livecoinwatch.com/

My surprise is that I would have thought that the fine folks at Ripple would have tied this new marketing campaign to a much stronger liquidity position than struggling between 4th and 5th place.  Third place Ethereum is 3 times as liquid but less than twice the market cap.

The saving grace for me is the logic might be to draw attention so that the few of us that are glued to screens to monitor the growth in success of XRP can actually watch the rise to success in real time.

Thoughts?  

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Market makers earn money through buying and selling with a spread. As ODL volume increases, the amount of money being made by market makers increases (given a fixed spread). This raises the price of X

I wouldnt worry about this, the ODL network will grow fast once its really up and running with more corridors. There will be no stopping it once they have 4+ ODL corridors, that way customers can star

This seems entirely reasonable to me. There are many 'variables' that come into play that can swing the volume requirements by orders of magnitude. For example, if the whole 40billion tokens in circul

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It is odd to think that xRapid has been live for over a year with dozens of FI's now using it, and yet BTC (with no real trading or use case) is showing to have ~10x the liquidity.

This might be a stupid question; do we know how their liquidity metric is being calculated?

Edited by XRPboi
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1 minute ago, XRPboi said:

It is odd to think that xRapid has been live for over a year with dozens of FI's now using it, and yet BTC (with no real trading or use case) is showing to have ~10x the liquidity.

Bitcoin has been in existence longer, has gotten much more attention and has by far the most trading pairs in the crypto market.

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None of the marketcap websites such as livecoinwatch specifically measure the trades happening via ODL/xRapid, but capture all the trades happening on exchanges. So the data you state is not precise for measuring ODL activity.

For ODL activity, where actual volume is still low, refer to specialised websites such as https://utility-scan.com/#/dashboard. The low volume will ramp up once new corridors are online, we are still between « crawl » and « walk » phases.

Galgitron is also posting interesting data on Twitter.

Edited by Claddy
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On Demand Liquidity, from a marketing/naming standpoint, refers more to the idea of cross border transactions being executed with "on demand" liquidity rather than liquidity "in storage" via nostro/vostro accounts.  Nostro and vostro accounts require pre-funded fiat to liquefy transactions.  The ODL product (formerly xRapid) seeks to change that from "stored/deposited" to "on demand".  Storing money in someone else's bank ties up capital and is expensive.

The direct meaning of the name is not related to the overall market activity/liquidity of XRP.

 

meegwell

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LCW probably calculates liquidity based on the volume within 2% of mid market price. It would be interesting to sum up only the liquidity from The crypto compare top tier exchanges and see what the volume looks like.

CMC’s liquidity calculation has BTC at ~60M and XRP at 20M (in the other thread I posted) which is much lower than LCW. CMC also doesn’t say exactly how they calculate liquidity because they don’t want exchanges gaming the system

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12 hours ago, ADingoAteMyXRP said:

This site shows live ODL activity and volumes: https://utility-scan.com/#/dashboard

Comparing speculative volume to utility volume right now assumes that speculative volume of BTC will also climb to keep pace with XRP utility volume. Why would you assume that's the case?

Because speculative volume drive upward price pressure a lot more than ODL. With ODL, you are basically buying and selling at the same prices at two different exchanges. Its almost the same effect as wash trading.The net effect is 0 on price. With speculative volume, people are buying and holding for a higher price, which exerts upward pressure. In terms of price increasing: Speculative volume > ODL.

Besides you need other participants besides the ODL players to provide liquidity. With speculator and constant market trades, you don't have any liquidity.

Edited by Archbob
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13 hours ago, ADingoAteMyXRP said:

This site shows live ODL activity and volumes: https://utility-scan.com/#/dashboard

Comparing speculative volume to utility volume right now assumes that speculative volume of BTC will also climb to keep pace with XRP utility volume. Why would you assume that's the case?

I’ve looked there a few times and don’t think it can be correct.  The amounts it’s stating are understating the ODL transactions I think.  Having said that...  ODL so far is definitely very small volumes.

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48 minutes ago, jbjnr said:

 

Market makers earn money through buying and selling with a spread. As ODL volume increases, the amount of money being made by market makers increases (given a fixed spread). This raises the price of XRP because it becomes cost effective to pay more for XRP and outbid other market makers who are also earning $ from the spread. There is a lower bound on the price of XRP that is proportional to the ODL volume. When the daily volume enters the $100m+ per day we will (I believe) start to see a noticable (and possibly dramatic) effect on price. This is based on my own theory and models but I have yet to see a counter argument that negates the price rise effect.

One might argue that the spread will simply drop as volume increases, but it does not need to - as long as the costs overall are better than the existing nostro/vostro costs then ODL can outcompete and spread does not need to drop further.

Currently we have a couple of corridors with total volume under $1m per day, when this goes up by a factor or 10+ and we have 10+ times as many corridors, I am quite confident that we will see price increases. (My numbers are not exact).

Well that gives us some mental targets - 100 times present vol,  sounds a lot: We really have only one corridor working well and that is the Mex/US/Mex.  Vol is doubling every month or less, so it should reach perhaps ten within 6 months.  4- 6 more corridors should be opening on very low vols in the next 3 months and will be perhaps on ten this time next year?  By then there should be more corridors coming in that will perhaps be bring us to the sort of total you are supposing in 18 months?

It is possible that the experience from the Mex/US corridor will give the manager experience about how to ramp up corridors faster, and the network effect could also come into play.

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34 minutes ago, Julian_Williams said:

By then there should be more corridors coming in that will perhaps be bring us to the sort of total you are supposing in 18 months?

This seems entirely reasonable to me. There are many 'variables' that come into play that can swing the volume requirements by orders of magnitude. For example, if the whole 40billion tokens in circulation at the moment are 'liquid' then clearly supply is abundant and this lowers the price because it is 'easy' for the market to provide as much as is needed. If 39billion is locked up in private wallets and the remaining 1billion distributed between 20 exchanges each with traffic of 10+million $ equivalents per day, then the price will be higher. I worry greatly about massive price fluctuations that can be triggered by

a) ODL volume rises, causing xrp price to rise

b) investors see price rising and know that reducing supply causes further rises, so they buy and hold xrp

c) prices rises more, leading to speculative feedback bubble

d) investors sell, causing crash in price

It is absolutely essential that xrp remains liquid so that b->c->d scenarios are prevented. Currently we have seen one major bubble at the end of 2017 (and that was not even fueled by ODL) - since then sales have been sufficient and relaxed the price (and there are presumably reserves held by MMs contracted to ripple that can be released as needs arise). The total capitalization of xrp is currently only $10billion or thereabouts. When there is $0.5billion flowing daily through xrp, it is inevitable that the total capitalization will be much much higher. Providing ODL remains cheaper than nostro/vostro (including all forms of digital fiat and IOUs). For that proviso, we await the results of moneygram+friends.

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3 hours ago, jbjnr said:

This seems entirely reasonable to me. There are many 'variables' that come into play that can swing the volume requirements by orders of magnitude. For example, if the whole 40billion tokens in circulation at the moment are 'liquid' then clearly supply is abundant and this lowers the price because it is 'easy' for the market to provide as much as is needed. If 39billion is locked up in private wallets and the remaining 1billion distributed between 20 exchanges each with traffic of 10+million $ equivalents per day, then the price will be higher. I worry greatly about massive price fluctuations that can be triggered by

a) ODL volume rises, causing xrp price to rise

b) investors see price rising and know that reducing supply causes further rises, so they buy and hold xrp

c) prices rises more, leading to speculative feedback bubble

d) investors sell, causing crash in price

It is absolutely essential that xrp remains liquid so that b->c->d scenarios are prevented. Currently we have seen one major bubble at the end of 2017 (and that was not even fueled by ODL) - since then sales have been sufficient and relaxed the price (and there are presumably reserves held by MMs contracted to ripple that can be released as needs arise). The total capitalization of xrp is currently only $10billion or thereabouts. When there is $0.5billion flowing daily through xrp, it is inevitable that the total capitalization will be much much higher. Providing ODL remains cheaper than nostro/vostro (including all forms of digital fiat and IOUs). For that proviso, we await the results of moneygram+friends.

If this is the case, then why don't these institutions use an XRP based stablecoin to avoid price fluctuations?

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6 hours ago, jbjnr said:

Market makers earn money through buying and selling with a spread. As ODL volume increases, the amount of money being made by market makers increases

Has anyone tried market-making on exchanges where corridors are “live”? 

According to this thread by @BobWay anyone is able to make markets and if your offer is used for ODL, you are compensated through the “incentive algorithm”.
Can anyone provide an example of say “market-making” USD/XRP corridor? Would it be as simple as setting limit buy/sell orders of both USD and XRP on an ODL exchange (say bitstamp or bitso)? 

 

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