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Q3 2020 XRP Markets Report


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Does anybody understand ’leasing” XRP in the ODL context?

They say leased XRP are ultimately returned to Ripple.  Are they perhaps leasing XRP to market makers to use in ODL corridors?  So the MM trades and makes money on arbitrage and the spread and the XRP involved are leased from Ripple enabling the MM to have a much bigger stake than her starting funds would otherwise allow?

I think that’s one possible interpretation of the report...  any better ones?

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1 hour ago, BillyOckham said:

They say leased XRP are ultimately returned to Ripple.  Are they perhaps leasing XRP to market makers to use in ODL corridors?  So the MM trades and makes money on arbitrage and the spread and the XRP involved are leased from Ripple enabling the MM to have a much bigger stake than her starting funds would otherwise allow?

Doesn’t specifically mention ODL corridors, but probably safe to assume so. From the article:

Certain wallets that are being used for XRP sales also provide short term leases to market makers. This is worth noting given that this is often mischaracterized by market participants as sales. Leases are ultimately returned to Ripple.


I always thought the market price of XRP would be a hurdle for MM’s in need of inventory.

Like SquareyBone points out sometimes, the current price of XRP is plenty enough to support the present volume. But for any new market makers wanting to set up shop, the entry barrier is quite steep and market volatility adds to the risk of them holding inventory.

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5 minutes ago, mDuo13 said:

No, the price of XRP is irrelevant to those calculations. In Q2 the company didn't buy any XRP. In Q3 the company bought over $45 million worth of XRP to offset additional XRP sold as part of On-Demand Liquidity Line of Credit. Q2: 32 million sold minus 0 bought = 32 million net sales. Q3: 81 million sold minus 45 million bought = ~36 million net sales.

The full circle on ODL Line of Credit is something like this:

  1. RippleNet customer borrows XRP from Ripple on-demand.
  2. Customer sends the XRP through ODL, selling it for a destination currency based on where the payment is going. (The destination currency is withdrawn from the receiving exchange and ends up in the hands of the payment beneficiary.)
  3. The customer pays Ripple back (probably in USD) for the XRP they borrowed.
  4. Ripple uses (probably) USD to buy XRP back from the market.

Steps 3 and 4 can happen asynchronously, so customers don't have to wait for them to finish. Overall, Line of Credit provides RippleNet customers faster and more flexible options for sending payments. Step 4 ensures that Line of Credit does not unbalance the market supply and demand for XRP.

Curious if you guys ever read my write up where I articulated this process?

https://medium.com/@KarmaCoverage/how-xpool-may-work-an-attempted-guess-daf3674f17c7

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12 minutes ago, mDuo13 said:

The full circle on ODL Line of Credit is something like this:

  1. RippleNet customer borrows XRP from Ripple on-demand.
  2. Customer sends the XRP through ODL, selling it for a destination currency based on where the payment is going. (The destination currency is withdrawn from the receiving exchange and ends up in the hands of the payment beneficiary.)
  3. The customer pays Ripple back (probably in USD) for the XRP they borrowed.
  4. Ripple uses (probably) USD to buy XRP back from the market.

Steps 3 and 4 can happen asynchronously, so customers don't have to wait for them to finish. Overall, Line of Credit provides RippleNet customers faster and more flexible options for sending payments. Step 4 ensures that Line of Credit does not unbalance the market supply and demand for XRP.

Thank you so much for that explanation.  I’ve had a concern ever since I heard of the line of credit that it would (partially?) remove the demand side of XRP buys leaving only the sell pressure.

 

It is very reassuring to hear that Ripple are concerned about that price dynamic and take steps to ensure they are not pushing it down.

I’m not sure I understand why it is needed though...   the XRPUSD side has lots of liquidity doesn’t it?  The XRPPESO side would seem more likely to have liquidity issues.  Does that mean that the customers using LOC are the ones SENDING from smaller markets?  Like maybe Phillipines to Thailand?

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10 hours ago, mDuo13 said:

No, the price of XRP is irrelevant to those calculations. In Q2 the company didn't buy any XRP. In Q3 the company bought over $45 million worth of XRP to offset additional XRP sold as part of On-Demand Liquidity Line of Credit. Q2: 32 million sold minus 0 bought = 32 million net sales. Q3: 81 million sold minus 45 million bought = ~36 million net sales.

The full circle on ODL Line of Credit is something like this:

  1. RippleNet customer borrows XRP from Ripple on-demand.
  2. Customer sends the XRP through ODL, selling it for a destination currency based on where the payment is going. (The destination currency is withdrawn from the receiving exchange and ends up in the hands of the payment beneficiary.)
  3. The customer pays Ripple back (probably in USD) for the XRP they borrowed.
  4. Ripple uses (probably) USD to buy XRP back from the market.

Steps 3 and 4 can happen asynchronously, so customers don't have to wait for them to finish. Overall, Line of Credit provides RippleNet customers faster and more flexible options for sending payments. Step 4 ensures that Line of Credit does not unbalance the market supply and demand for XRP.

Thanks! Appreciate the explanation!

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17 hours ago, BillyOckham said:

 Does that mean that the customers using LOC are the ones SENDING from smaller markets?  Like maybe Phillipines to Thailand?

I'd think it would be all markets, where the legal framework for the LOC is known.

Essentially Ripple is acting as both the sender and the recipient, because they originate the TX via LoC issuance, then the money flows as the LoC client/borrower needs to support their business needs, then Ripple goes back to the public market and buys XRP to close the TX's round trip.

They may do more lending into markets in the lower side of the flows. So market A has 100 XRP flows into market B, while market B only has 25 XRP flows into market A. Ripple would/could come into Market B and lend enough XRP supply to equal out the imbalance in flows.

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