XRP at Higher Prices Is a Better Vehicle for Payments

Ripple CTO David Schwartz believed XRP would be a more efficient payment vehicle by hitting higher prices and commanding better liquidity.

Prominent XRP influencer Crypto Eri recently spotlighted a statement from Ripple’s Chief Technology Officer, David Schwartz, about XRP’s price when used for facilitating large cross-border payments.

Crypto Eri quoted Schwartz’s reply to a question on Quora about institutions supposedly seeking XRP’s price to remain low for payment transactions. She highlighted the view that “Higher prices tend to correlate with higher liquidity, which means cheaper payments.”

Lot’s of nuggets on Quora.
Taking about #XRP

“Higher prices tend to correlate with higher liquidity, which means cheaper payments”

“So a higher priced asset is a better vehicle for payments, at least if you’re targeting high value payments.” pic.twitter.com/pqfFFZKsuc

— 🌸Crypto Eri 🪝Carpe Diem (@sentosumosaba) September 24, 2023

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Higher Prices Correlate with Higher Liquidity

In particular, a questioner raised concerns about banks adopting Ripple and its implications for the XRP market price. Schwartz provided a detailed explanation concerning the underlying process.

He argued that the idea of banks wanting to keep XRP’s price low would not hinder mainstream adoption. Schwartz emphasized that the XRP required for a $1 million payment would always be at least $1 million.

Contrary to the notion that lower prices would be more favorable, he stated that higher prices correlated with increased liquidity, resulting in cheaper transactions. The Ripple CTO illustrated this point by drawing a comparison to Bitcoin.

He highlighted that using Bitcoin as an intermediary currency for a $1 million transaction when its price was low, such as $100, would create significant price fluctuations. Such fluctuations would occur due to the absence of much liquidity when acquiring the necessary Bitcoin and converting it into the recipient’s local currency.

“… trying to buy enough Bitcoin to buy the house, you’d push the price up significantly. And when the recipient tried to convert those bitcoins into their local currency, they’d push the price down significantly.”

Schwartz explained that the situation would render Bitcoin impractical for high-value transactions. However, where Bitcoin has surpassed $26,000 in the current market, Schwartz noted it becomes feasible to transact large sums without causing significant market disruptions.

According to Schwartz, the possibility is due to the higher price, which requires a smaller fraction of the total asset for such transactions. Schwartz believes a similar principle plays out with XRP.

In sum, when XRP is priced higher, it would serve as a more effective tool for handling high-value payments as fewer units of the digital asset would be required.