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Appreciation/Volatility or Utility/Stability?


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We have seen amazing price appreciation the last week (thank you BTC) but if you look over the year to date you seen absolutely horrendous price volatility (Market makers end up having to hold positions in XRP for prolonged periods, the greater the volatility of XRP, the greater the spread on the Fiat1 -> XRP and XRP - > Fiat2 transactions, increasingt the cost relative to conventional payments).

Do you you prefer short term appreciation that undermines the utlity argument or longer term price stabiilty that reinforces the utlity argument?

 

 

 

 

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46 minutes ago, KarmaCoverage said:

No offence, but I'm just going to go ahead and call BS on this.

  1. The real reason to be thankful to BTC is for pioneering blockchain technology... and having a governance structure that makes it unusable in actual complaint financial transactions. The fact that the crypto markets follow BTC's market movements is due to the fact that BTC is the "bridge currency" for essentially all of the crypto market. This will obviously change with time, and BTC's dominance wanes and fades away.
  2. Yes there is still, and will continue to be (relative to public markets) a lot of volatility in the entire crypto market. The good thing, is that an XRP TX is so fast, that the TX participants are not exposed to much of that volatility risk.
  3. or 2.a... Yes Market Makers are exposed to "prolonged periods" of volatility while holding XRP. The good thing, is that because the inventory turn over cycles are so much faster a Market Maker will need to float substantially less overall amount of capital held in the asset which they are making markets in "(relative to the conventional payments)", XRP in this case.
  4. "Do you prefer X or X market conditions" , this is simply a False Dichotomy which is defined as...

 

Although nailing it in the answer, Xerxes does not deserve that much effort. He has been hiding FUD in some, to his mind clever, questions for longer now. 

The reason why he is here is hidden in his first sentence. Oh wait, the first paragraph is an entire sentence. Ok, hint: It starts with B.

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4 minutes ago, Caracappa said:

Although nailing it in the answer, Xerxes does not deserve that much effort. He has been hiding FUD in some, to his mind clever, questions for longer now. 

The reason why he is here is hidden in his first sentence. Oh wait, the first paragraph is an entire sentence. Ok, hint: It starts with B.

No sh!t :rolleyes: it always has to do with the child who grew too big too early, and now must learn to live in the adult world with other ledgers as they ultimately out grow it.

 I didnt post for that profile's benefit, rather for the other forum members who may not know enough of the facts to discern a real fact from BS cloaked in false authentic wording masquerading as a "fact".

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Posted (edited)

ok, so all the abuse from @KarmaCoverage and @Caracappa because they think I am a Bitcoin troll?

Lol

Bitcoin sucks, no use case,  terrible for the environment, totally corrupted as well.

The only point I was making in my first point it that the recent price appreciation is solely down to the increase in price of Bitcoin, which in turn is probably only due to Tether fueled price manipulation.

Do either of you seriously believe the recent increase in the XRP price is due to a sudden appreciation by the world of the utility of XRP and not due to simply being dragged up by Bitcoin like so many Alts?

Maybe you will understand my question better, if there is a picture. The price volatility YTD has been insane. Volatility increases spreads on changing into an out of any currency. Increase spreads make ODL uneconomic which means it crumbles or Ripple subsidises it.

 

ytd.png

Edited by xerxesramesepolybius
missed some words
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17 minutes ago, xerxesramesepolybius said:

Bitcoin sucks, no use case,  terrible for the environment, totally corrupted as well.

Agreed

Quote

The only point I was making in my first point it that the recent price appreciation is solely down to the increase in price of Bitcoin, which in turn is probably only due to Tether fueled price manipulation.

You did not make that point clear enough in the first post. It was a non-interpunctual rant that was hard to read. But agreed with the above

Quote

Do either of you seriously believe the recent increase in the XRP price is due to a sudden appreciation by the world of the utility of XRP and not due to simply being dragged up by Bitcoin like so many Alts?

Nope. It goes up because the correction is over and the cycle resets, just like with most of the other 5000 coins that exist. XRP has the advantage that it is in the top10, and has a good story behind it that might or might not come to fruition in the future.

Quote

Maybe you will understand my question better, if there is a picture. The price volatility YTD has been insane. Volatility increases spreads on changing into an out of any currency. Increase spreads make ODL uneconomic which means it crumbles or Ripple subsidises it.

I love pictures! Current volatility is not a problem for ODL itself as the in/out is mere seconds. But agreed that for a MM to hold XRP for longer periods the risks increase (too?) massively. I think that is also why Ripple is coming up with the loan construct. Nevertheless, the market needs to be bigger to get rid of the volatility.

Quote

Do you you prefer short term appreciation that undermines the utlity argument or longer term price stabiilty that reinforces the utlity argument?

Back to the original question. As an investor I like short term appreciation. A couple of speculative bubble cycles before utility kicks in. But in the end the utility thing sounds nice. That however is years away imo. When looking at the micro scale you see bubble after bubble correcting hard, but on macro scale it's just the market getting bigger, and by doing that more stable eventually giving utility more chance.

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2 hours ago, xerxesramesepolybius said:

Do either of you seriously believe the recent increase in the XRP price is due to a sudden appreciation by the world of the utility of XRP and not due to simply being dragged up by Bitcoin like so many Alts?

 

On 8/5/2020 at 2:27 PM, KarmaCoverage said:

The fact that the crypto markets follow BTC's market movements is due to the fact that BTC is the "bridge currency" for essentially all of the crypto market. This will obviously change with time, as BTC's dominance wanes and fades away.

  

2 hours ago, Caracappa said:

Current volatility is not a problem for ODL itself as the in/out is mere seconds. But agreed that for a MM to hold XRP for longer periods the risks increase (too?) massively. I think that is also why Ripple is coming up with the loan construct. Nevertheless, the market needs to be bigger to get rid of the volatility.

Nailed it, in seconds.

Yes, and increasing in value is 1/2 the risk. They may need to pull capital out of "Float" if demand does not track with value growth. It would make more sense to put the value to work somewhere else, Market Makers are not Speculators.

Correct, this is why Loans of XRP have been a topic of conversation for years, all the way back to the beginning. Enabling a Market Maker to borrow their Inventory of XRP, enables the Market Maker to choose which portion of their inventory they want to have... A. fully vested, or levered up (via borrowing it) and... B. enables the Market Maker to pursue a "Marginal cost structure", whereby they borrow inventory at x% and sell access to that inventory at x+%. limiting their exposure to market volatility.

Edited by KarmaCoverage
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Well I am glad you don't think I'm  a Bitcoin troll. I have little interest in that madness.

9 hours ago, KarmaCoverage said:

Nailed it, in seconds.

Yes, and increasing in value is 1/2 the risk. They may need to pull capital out of "Float" if demand does not track with value growth. It would make more sense to put the value to work somewhere else, Market Makers are not Speculators.

Correct, this is why Loans of XRP have been a topic of conversation for years, all the way back to the beginning. Enabling a Market Maker to borrow their Inventory of XRP, enables the Market Maker to choose which portion of their inventory they want to have... A. fully vested, or levered up (via borrowing it) and... B. enables the Market Maker to pursue a "Marginal cost structure", whereby they borrow inventory at x% and sell access to that inventory at x+%. limiting their exposure to market volatility.

You know "market makers" should really be called "liquidity providers". Liquidity provider is the term from the FX market, market maker is used in securities markets. 

Loan idea is an interesting topic.

A liquidity provider (in the remittance case) is primarily is providing liquidity converting from incoming XRP into the local currency eg. pesos or baht etc.

So they end up sitting long on XRP until they can get the XRP to an exchange where they can change into dollars (which then have to be converted back into Pesos via conventional methods).

You would only potentially benefit from borrowing XRP if you are selling XRP in exchange for the currency being sent via remittance i.e. dollars. Is there really any lack of liquidity in selling XRP for Dollars? That is a serious, non rhetorical question. Anyone?

 

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19 hours ago, xerxesramesepolybius said:

You know "market makers" should really be called "liquidity providers". Liquidity provider is the term from the FX market, market maker is used in securities markets. 

A liquidity provider (in the remittance case) is primarily is providing liquidity converting from incoming XRP into the local currency eg. pesos or baht etc.

So they end up sitting long on XRP until they can get the XRP to an exchange where they can change into dollars (which then have to be converted back into Pesos via conventional methods).

Both "market makers" & "liquidity providers" are technically Specialists.

Quote

A specialist has four major roles to fill...

  1. He acts as an auctioneer to show brokers the best bids and offers.
  2. A specialist also continually updates floor brokers to act as a catalyst for buying and selling.
  3. He places an order on behalf of brokers and places orders for customers ahead of his own.
  4. Despite all of these duties, the number of specialists has declined, thanks to electronic trading. 

In the IoV...

#1 is done via running Orderbooks on a crypto Exchange, and communicated via the Exchange's API.

#2 is preformed via API Get calls and websockets connecting traders to data flows on an Exchange's (or private MM's) orderbooks.

#3 is done by the traders using the Exchange's API Post calls.

#4 the article is not considering that these roles and functions are now preformed via HFT and other electronic methods.

... and yes, Specialists of any type do hold an inventory of whatever asset they are making a market in.

19 hours ago, xerxesramesepolybius said:

Loan idea is an interesting topic.

You would only potentially benefit from borrowing XRP if you are selling XRP in exchange for the currency being sent via remittance i.e. dollars. Is there really any lack of liquidity in selling XRP for Dollars? That is a serious, non rhetorical question. Anyone?

I've been writing about XRP Loans ever sense PayChan came out. While it is a couple years old, this How xPool write up is the most detailed explanation of how Ripple could mechanically manage lending out XRP.

 Imagine a Bank, with a Corp Treasury client who needs international payments to support their supply chain. Now this Bank knows an awful lot about the volume of Demand that the Corp is creating via their business activities, and they know how much that Corp is floating abroad. So the banker goes to the Corp Treasurer and says... "hey, I can give you a "line of credit" that has special international access. Then when you need to pay a supplier, you can borrow the money from your LoC for just a few minutes, then we (the Bank and the Corp) can either settle up with a debit of the Corp's cash deposit balance, or the Bank can carry the balance on the line of credit."

This way, the Bank has upsold the XRP (charging a higher rate of interest than the rate the Bank borrowed the XRP from their MM at) for the time it had Utility and was useful for the international payment... and neither the Bank, nor the Corp are exposed to FX risk, the "special line of credit" is denominated in domestic Fiat.

Edited by KarmaCoverage
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22 hours ago, KarmaCoverage said:

Both "market makers" & "liquidity providers" are technically Specialists.

In the IoV...

#1 is done via running Orderbooks on a crypto Exchange, and communicated via the Exchange's API.

#2 is preformed via API Get calls and websockets connecting traders to data flows on an Exchange's (or private MM's) orderbooks.

#3 is done by the traders using the Exchange's API Post calls.

#4 the article is not considering that these roles and functions are now preformed via HFT and other electronic methods.

... and yes, Specialists of any type do hold an inventory of whatever asset they are making a market in.

I've been writing about XRP Loans ever sense PayChan came out. While it is a couple years old, this How xPool write up is the most detailed explanation of how Ripple could mechanically manage lending out XRP.

 Imagine a Bank, with a Corp Treasury client who needs international payments to support their supply chain. Now this Bank knows an awful lot about the volume of Demand that the Corp is creating via their business activities, and they know how much that Corp is floating abroad. So the banker goes to the Corp Treasurer and says... "hey, I can give you a "line of credit" that has special international access. Then when you need to pay a supplier, you can borrow the money from your LoC for just a few minutes, then we (the Bank and the Corp) can either settle up with a debit of the Corp's cash deposit balance, or the Bank can carry the balance on the line of credit."

This way, the Bank has upsold the XRP (charging a higher rate of interest than the rate the Bank borrowed the XRP from their MM at) for the time it had Utility and was useful for the international payment... and neither the Bank, nor the Corp are exposed to FX risk, the "special line of credit" is denominated in domestic Fiat.

Wow! Respect to the amount of analysis you have done on Medium. Most impressive.

but still don't think it answers my point about loans and ODL remittance flow.

Let me try again

1. Mexico/Bitso -  a place with previously precious little liquidity from XRP into Peso or even vice a versa. Remember Cualix? All the moon boys jumping up and down but went nowhere.

2. Remittance flow is overwhelming one way, Dollars heading to Mexico which get converted ultimately into Pesos.

3. ODL switches on, massive flow of orders to convert XRP into Pesos, never the other way around.

4. Liquidity providers needed to fill also those orders because there is insufficient local demand.

5. Filling the orders requires they need pesos and a cost effective and quick way to convert XRP back into pesos, since their is no local demand for XRP and the volaility of XRP is very risky for them.

6. Only place to get rid of their XRP, with sufficient liquidity into dollars are US exchanges. So they are long dollars which they need to convert into to Pesos.

So how does the ability to borrow XRP (which they need to get rid of and convert back into Pesos) help in any way?

Thanks

 

 

 

 

 

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On 8/9/2020 at 8:47 AM, xerxesramesepolybius said:

2. Remittance flow is overwhelming one way, Dollars heading to Mexico which get converted ultimately into Pesos.

Solving these natural imbalances is the core job of a MM, and the solution is not always a simple 2 asset back and forth solution. The two solutions that I think are best suited to the situation are

1. find a party with a dependable economic interest which is counter the the main flow (USD --> Peso). To find a party with a direct (non-triangular) counter flow economic situation, I would look to businesses in Mexico who import something from the US.

2. look for some form if Triangular Arbitrage opportunity, which can be more than 3 legs, and in the XRPL world it is called a "circular payment" which is something that Ripple has proactively not built into XRPL and make arguments against. I agree with that decision, because it is sort of like enabling a Loop, but also see where it would be useful, however the same behavior can be accomplished by using 2 accounts.

Triangular-arbitrage.jpg

 

On 8/9/2020 at 8:47 AM, xerxesramesepolybius said:

how does the ability to borrow XRP (which they need to get rid of and convert back into Pesos) help in any way?

It can help with reducing the cost of any leg in a triangular trade. Replace $ in the pic above with XRP, borrow that to start, and end with it. or borrow all legs of the trade, and conduct the arbitrage.

Also, keep in mind that, re paying the XRP loan back in XRP the bad thing is if XRP goes Up, because you are paying the loan back with a more valuable XRP. If XRP goes down, you are paying the loan back with a less valuable thing of value.

More importantly, or at least what I wrote about in, https://medium.com/@KarmaCoverage/what-could-xpool-be-an-attempted-guess-50165cb7e9cd there are systemic level benefits from being able to borrow/lend XRP. These out weigh the benefits/risks which individual traders are exposed to.

Quote

 

  • Prime the pump for new fiat:XRP markets where necessary, both supply & demand side
  • Improve competitiveness of Ripple Rails where the pump is already primed. This could be by improving Depth or by reducing Costs of the corridor.
  • Enable hedging and derivatives to be designed, the financial engineering work

 

In this write up https://medium.com/@KarmaCoverage/ripple-inc-as-a-lender-of-xrp-risk-exposure-goals-keep-upside-protect-borrower-from-downside-d018095d696f I discussed this, from an Exchange operator's perspective, who wants to offer their traders margin, shorting, and/or develop derivatives on XRP.

Quote

Risk exposures of an Exchange which enables Traders to Short XRP

  • The Trader has voluntarily taken the downside risk exposure, not Exchange.
  • The Exchange does not have to engage the open market, or borrow from other Trader’s accts, to lend the XRP. They can simply tap the PayChan from Ripple Inc.
  • (I have not looked into this in detail) but the Exchange could be getting MM incentives from Ripple Inc, possibly with additional positive upside exposure to XRP.

Remember, Ripple Inc will be looking at this from the perspective of developing the ecosystem and environment in which XRPL will exist. This is a "systemic viewpoint".

Edited by KarmaCoverage
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This post revisits the same issue from 2 years ago. It is another XRP paradox, similar to the escrow.

However this paradox only concerns holders, as it seems they are between a

ROCK: (XRP adoption requires a stable price in order to be utilized and become valuable)

and a HARD place: (Holders believe that XRP utility and adoption will skyrocket the price approx 5-10X so they can dump their bags)

If nothing else, folks on this site should hope for XRP around $1.00 US, because at that point I am happily out.

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19 hours ago, Valhalla_Guy said:

ROCK: (XRP adoption requires a stable price in order to be utilized and become valuable)

This is nonsense.  I absolutely know that you have no basis for it because there is none,  but I will ask for forms sake:  what makes you think that? Do you have any evidence for it?

 

EDiT:  btw...  you do know that ODL means there is essentially no volatility risk yeah?

Edited by Dogowner5
Added ref to ODL
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46 minutes ago, Dogowner5 said:

This is nonsense.  I absolutely know that you have no basis for it because there is none,  but I will ask for forms sake:  what makes you think that? Do you have any evidence for it?

 

EDiT:  btw...  you do know that ODL means there is essentially no volatility risk yeah?

You can start by searching for Mr. Garlinghouse direct quotes. MMs are not going to cover the spreads on an excessively volatile coin. RL’s PUBLICLY STATED goal has always been a stable price for XRP, “because that will lead to adoption” XRP was never intended as an investment device. Otherwise it would look a lot like a security.🙄🙄
The whole purpose of inventing the escrow was to provide a means for price stability and confidence. (Although that was another rookie mistake by RL)

Your post is completely without basis. Try actually listening to the words that Mr. Garlinghouse and crew use. They have been very clear on this since 2018 (when he started doing television interviews)

You suffer from insider information syndrome (meaning you only listen to your own voice when others are talking)

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8 hours ago, Valhalla_Guy said:

You can start by searching for Mr. Garlinghouse direct quotes. MMs are not going to cover the spreads on an excessively volatile coin. RL’s PUBLICLY STATED goal has always been a stable price for XRP, “because that will lead to adoption” XRP was never intended as an investment device. Otherwise it would look a lot like a security.🙄🙄
The whole purpose of inventing the escrow was to provide a means for price stability and confidence. (Although that was another rookie mistake by RL)

Your post is completely without basis. Try actually listening to the words that Mr. Garlinghouse and crew use. They have been very clear on this since 2018 (when he started doing television interviews)

You suffer from insider information syndrome (meaning you only listen to your own voice when others are talking)

Oh dear.  I think absolutely everything you said there was totally backwards.  Interesting that we can both be sure the other is looking at it all wrong.  :) 

Luckily there is a way to resolve it.  Actual quotes.  So since you are the one making the claim (“XRP adoption requires a stable price in order to be utilized and become valuable”) then the onus is on you to provide the support for your claim.  List a quote or two that proves your point that Ripple have said this thing you claim.
 

I know you won’t be able to because in fact Ripple have repeatedly said the opposite.  In ODL for instance they said that volatility is not important over the three seconds of an XRP transfer.  (Which is a bit of an exaggeration on their part since the ledger closes are closer to four seconds on average and the actual ODL transaction takes a bit longer.)

I particularly like the way you are willing to state as facts so many things that you cannot actually know for sure.  My diagnosis as a sufferer of insider information syndrome for instance.  :) 
 

Here...  I’ll give you a starting point to think about it.  Surely you’ve heard Brad say a rising tide lifts all boats?  How does that gel with a stable price?  Truly mate you are on a hiding to nothing here, you really do have it totally wrong.

 

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