XRP Price Surge Could Automatically Boost XRPL Meme Coin Values, Ripple CTO Explains

Ripple CTO David Schwartz recently shared insights on how many meme coins on the XRP Ledger (XRPL) are directly impacted by XRP’s price fluctuations. 

In a post on X, Schwartz explained that the majority of these tokens rely on automated market maker (AMM) liquidity pools that maintain a fixed exchange rate with XRP. This causes their prices to move in tandem with XRP’s dollar value.

Notable examples of XRPL meme coins include “XRP ARMY,” which has achieved a market cap of $26.1 million with a liquidity pool of $2.09 million.

How XRPL Meme Coins Move with XRP

XRPL meme coins frequently see price changes that match XRP’s own price action, in contrast to other ecosystems where meme coins might swing drastically depending on excitement or speculative trade. According to Ripple’s CTO, this is because their liquidity pools are set up inside AMMs that employ XRP at a fixed exchange rate.

For instance, if the price of XRP rises by 5% in US dollars, the meme coin will likewise rise by 5%, provided no other price movement occurs. Because the AMM keeps the XRP-to-memecoin ratio constant, any external changes in XRP are immediately reflected in the valuation of the associated asset, causing this automated adjustment. 

Independent Price Action and Profit Taking

Despite this connection, meme coins on XRPL are not totally reliant on the price of XRP. Their value can be affected independently by external news, whale movements, and community buzz.

Even if XRP holders decide to keep their investments, a rise in the meme coin’s price could result in profit-taking. Because of this dynamic, traders who own XRPL meme coins are subject to two major price drivers:

1. Price changes for XRP: Any increase or decrease in XRP’s dollar value directly impacts the meme coin’s price because its liquidity is tied to an AMM pairing with XRP.
2. Memecoin-specific factors: Independent events like community hype, whale activity, and market sentiment can drive the memecoin’s price up or down, regardless of XRP’s movements.

What This Means for Traders

Investors in meme coins based on XRPL should be aware that they have built-in exposure to XRP in their holdings. Meme coins might profit if XRP rises, but the same coins might automatically see price reductions if XRP falls. However, this pattern can quickly diverge due to memecoin-specific events.

Knowing how these assets interact is essential for traders trying to maximize their strategy. Others may use this association as a chance to forecast memecoin price swings based on more general XRP patterns, while others may see it as a risk.