Will ODL cause an increase in price? Some thoughts..

[Chris_Reeves]

*Longish post warning*

Okay so we're all speculating that in the long term, ODL will ultimately drive a higher price. But how can that happen? What we've seen so far is that there is, currently, very little correlation between increased ODL volume and the overall price of XRP. That much I believe we can agree on. So does volume actually increase the price? My short answer is no, but all of the factors that are impacted by increased volume "should" drive positive price correlation. 

As Ripple continues to engage in new exchange partners, these exchange partners begin acting as Market Makers (MMs) and subsequently begin working with high volume traders to become MMs for ODL transactions. That's basically how it works. So, with an increase in overall transaction volume through ODL, this will facilitate a larger need for MMs. These MMs are required to hold XRP on the exchange and fill the order books to facilitate transactions and then they get some economic incentive (differs by exchange). With more MMs come more people purchasing large amounts of XRP on the open market to then use in their market making. This alone will impact the current supply as the economics of market making drive more large scale traders to work with the exchanges to get their cut of the fees. This, I believe, will cause an increase in price, nothing else.

And don't even get me started on banks. Once clear regulations are in place, I believe that banks, with their large amounts of currency, will begin market making for ODL transactions to get a cut of fees. This could be a huge revenue source for these banks. We could also see banks buying exchanges specifically for the purposes of facilitating ODL transactions for their own financial gain. At this point, the price of XRP would be significantly higher than where we have it today, just from the standpoint of very large institutions own XRP solely for the purposes of facilitating ODL transactions.

Fast forward 10-20 years, these same institutions are just going to send XRP back and forth because it has a clear value usage in their cross border flows. 

Long and short, market making is what will grow the price and volume needs to be much higher than where we are today to incentivize more MMs. Ripple is doing exactly what is necessary, growing exchange partners and launching new corridors. The positive price action from the increased MMs will do the rest. 

 

[Julian_Williams]

I agree

[Live4xrp]

40 minutes ago, Chris_Reeves said:

*Longish post warning*

 

@galgitron wrote some nice posts about ur subject...Aware of them?

http://galgitron.net/Post/The-Bionic-XRP

http://galgitron.net/Post/The-Case-for-XRP

[Flintstone]

That’s my mind set right there.

@Live4xrp I was just flicking through my pictures to find this screenshot...
 

It’s a good analogy of short term vs long term.

[TiffanyHayden]

I don't think ODL will cause an increase in price since there is no need to hold XRP (it's returned right after). Because it will cause a constant changing of hands, those positioned to charge transaction fees will be rewarded handsomely. 

 

[TiffanyHayden]

I also don't expect MM's to suddenly start purchasing XRP when so many people are perfectly willing to allow exchanges to have complete control over their holdings, interest free. Millions and millions and millions of XRP is just sitting idle at exchanges waiting for somebody who can find a way to make money off of it. 

 

[Flintstone]

29 minutes ago, TiffanyHayden said:

I don't think ODL will cause an increase in price since there is no need to hold XRP (it's returned right after).

If demand outweighs supply, the price will increase. To facilitate extra demand, more XRP will be needed. That is upward pressure.

XRP are not ‘returned’ right after. They need to be bought.

 

[TiffanyHayden]

14 minutes ago, Flintstone said:

XRP are not ‘returned’ right after. They need to be bought.

If that were true, you'd be describing the nostro/vostro situation that Ripple is trying to replace. Use is needed, not ownership. 

15 minutes ago, Flintstone said:

If demand outweighs supply,

At any given moment, do you think you think there will be demand for more than a billion XRP? 2 billion? 3 billion? That much is already sitting idle, waiting to be used. 

[Guest]

So Tiffany are you now of the opinion that XRP is not going to increase in price in any foreseeable future?

@TiffanyHayden

[TiffanyHayden]

1 minute ago, Tinyaccount said:

So Tiffany are you now of the opinion that XRP is not going to increase in price in any foreseeable future?

@TiffanyHayden

I definitely think the price will increase. I just don't think it's dependent on Ripple or any other lone entity. 

[TiffanyHayden]

Also, as it stands right now, the Fed is the lender of last resort.  I don't see why they wouldn't eventually create some IOUs to guarantee payments. 

Edited January 21, 2020 by TiffanyHayden

[Flintstone]

14 minutes ago, TiffanyHayden said:

If that were true, you'd be describing the nostro/vostro situation that Ripple is trying to replace. Use is needed, not ownership. 

I’m talking about those providing the ODL on partner exchanges. What you are describing is FI’s facilitating payments which hasn’t been discussed in this topic.

18 minutes ago, TiffanyHayden said:

At any given moment, do you think you think there will be demand for more than a billion XRP? 2 billion? 3 billion? That much is already sitting idle, waiting to be used. 

Yes, of course, if Ripple manage to capture a large slice of the target market. Plus, those idle XRP will need to be divided into each corridor and as payment volume increases into the future, more and more XRP will be required.

[Guest]

5 minutes ago, TiffanyHayden said:

I definitely think the price will increase. I just don't think it's dependent on Ripple or any other lone entity. 

Thanks for that.  Since we have you here, as it were, can I ask off-topic how you feel about the relevant chances and timing of XRP and XLM rising significantly in price?

The small amount of Twitter conversation I’ve seen with you in it,  had you fairly optimistic about XLM. (If I recall correctly...   perhaps I don’t..)

And lastly, to anyone really, if ODL usage is NOT the cause (or largely contributed to) an XRP price rise,  what will be? 

 

[TiffanyHayden]

17 minutes ago, Flintstone said:

XRP will need to be divided into each corridor

What are Central Banks doing as all of this is happening? Why do they need to exist?

11 minutes ago, Tinyaccount said:

Thanks for that.  Since we have you here, as it were, can I ask off-topic how you feel about the relevant chances and timing of XRP and XLM rising significantly in price?

The small amount of Twitter conversation I’ve seen with you in it,  had you fairly optimistic about XLM. (If I recall correctly...   perhaps I don’t..)

And lastly, to anyone really, if ODL usage is NOT the cause (or largely contributed to) an XRP price rise,  what will be? 

I think both XRP and XLM will increase in price because they work during a time when everything is so fundamentally broken. They're also both backed by entities that have the resources and desire to fix anything that may go wrong. 

[jbjnr]

2 hours ago, TiffanyHayden said:

I don't think ODL will cause an increase in price since there is no need to hold XRP (it's returned right after). Because it will cause a constant changing of hands, those positioned to charge transaction fees will be rewarded handsomely. 

Buys and sells of XRP are made with a spread of some basis points. When $1Billion per day is being transferred around the globe using ODL even at 10basis points spread, someone is earning $365million per year just off the fees. This gives xrp an intrinsic value. Even if cars were free (but limited in number), taxi drivers would pay to own them because they can earn money from giving people rides. Market makers will compete for this income and this gives xrp its value. The more xrp that is locked away and not being used for liquidity, the less is available for cross border transfers and the higher the 'price'. As price rises, investors will lock more up, this will in turn drive up the price via competition for the remaining xrp. ODL provides a floor price below which XRP should not fall and the floor price is directly proportional to ODL volume (and circulating tokens).