How will Ripple's AMMs Bet Impact the XRP Price?

Ripple’s CTO, David Schwartz, has recently stirred conversations about the potential impact of Automated Market Makers (AMMs) on the XRP Ledger (XRPL). Despite concerns of an immediate drop in XRP prices, Schwartz maintains a positive view, highlighting the cryptocurrency’s resilience.

I don’t think it will very much. There might be some trading strategies employed by humans today that make less sense with AMMs. But in exchange, new strategies such as arbitraging against the DEX and bidding in the continuous auction are created. 1/2
— David “JoelKatz” Schwartz (@JoelKatz) February 25, 2024

Here’s a deeper dive into his interesting take.

Insights on AMMs and XRP Trading Strategies

Responding to inquiries from Uptownsaul, a notable figure in the XRP community, Schwartz discusses the upcoming launch of a feature aimed at addressing XRP’s price fluctuations. He sees the transformative potential of AMMs, expecting a shift in trading strategies. Additionally, new opportunities, such as arbitrage on the XRPL DEX and participation in continuous auctions, are anticipated.

While volatility haversting does, at least in theory, reduce volatility, I don’t think AMMs on the XRPL DEX will cause a meaningful decrease in XRP price volatility any time soon. DEX trading activity is a drop in the XRP trading ocean. 2/2
— David “JoelKatz” Schwartz (@JoelKatz) February 25, 2024

Schwartz outlines Ripple’s plan to leverage AMMs for institutional payments, capitalizing on the liquidity they offer on the DEX for smoother transactions. While institutional payments weren’t the primary focus, Schwartz views them as a positive side effect.

He reasoned that the XRPL DEX’s trading volume is small compared to centralized exchanges and other platforms. For him, XRPL DEX trading is a “drop in the XRP trading ocean.”

Read More: Ripple News: Major Token Unlock & Whale Movement Shakes Up XRP Price

Challenges Faced

Admitting hurdles in the initial stages, Schwartz notes that key validators withdrew support due to a discovered bug, slowing down the AMM integration on the XRP Ledger. Despite setbacks, optimism remains, with calls for a revised proposal to address concerns within the XRPL community.

Market Impact

Remarkably, XRP’s price has remained steady, trading at $0.5389 with a modest 1.24% increase in the last month. In contrast, major cryptocurrencies like Bitcoin and Ethereum have seen significant surges. As Ripple prepares to introduce the AMM feature, there’s anticipation that XRP’s stability might persist.

Also Read: Ripple CTO David Schwartz Addresses XRP Price Controversies: What You Need to Know

The amendment aims to introduce liquidity pools to the XRPL, fostering decentralized trading and liquidity provision, akin to leading DeFi platforms. Ripple’s strategic moves and Schwartz’s insights position XRP as a frontrunner in innovative solutions to market challenges.

Source: https://coinpedia.org/news/xrp-price-to-drop-ripples-schwartz-questions-immediate-impact-of-amms/