XRP Price To Drop? Ripple’s Schwartz Questions Immediate Impact of AMMs

David Schwartz, Ripple’s Chief Technology Officer, recently questioned the idea that Automated Market Makers (AMMs) on the XRP Ledger (XRPL) would immediately drop the price of XRP. Schwartz thinks that AMMs won’t have a big effect on XRP in the short term, even though they might be able to reduce volatility through methods such as volatility harvesting and more excellent liquidity provision.

Will XRPL’s New Feature Further Reduce XRP’s Volatility? CTO Says NO

In this context, Ripple CTO David Schwartz has weighed in on the upcoming launch of a new feature designed to tackle XRP’s price fluctuations. Responding to queries from Uptownsaul, a prominent figure in the XRP community, Schwartz acknowledged the potential of the Automated Market Maker (AMM) to reshape trading strategies. While it may change current approaches, he noted that it could also open up new opportunities, like arbitrage on the XRPL DEX and engagement in continuous auctions.

He further talked about Ripple’s plan to use AMMs for institutional payments to take advantage of the liquidity that AMMs offer on the DEX (Decentralised Exchange) to make big deals easier. Theoretically, this approach could help stabilize market volatility by increasing liquidity on the XRPL.

However, Schwartz pointed out that there are already a lot of trades on the DEX and said that making institutional payments wasn’t the primary goal when creating the AMM feature, though they could be a good 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.”

Potential Setbacks

Despite his enthusiasm, the initial approach met with a setback. Key validators pulled their support because they found a bug that slowed down the process of adding AMM to the XRP Ledger. This loss makes it less likely that the amendment will work, even though it had a lot of support from validators before. As a result, concerns within the XRPL community are prompting calls for a revised proposal.

Market Impact

Conversely, XRP’s price has remained steady while other cryptocurrencies like Bitcoin and Ethereum have surged. Some people think it’s acting like a stablecoin, but there’s no proof Ripple is behind it. XRP is trading at $0.5389, up only 1.24% in the last month, while Bitcoin jumped 22.76% and Ethereum rose 36.91%. With Ripple introducing the AMM feature soon, there’s worry that XRP’s price could become even less volatile.

The amendment aims to introduce liquidity pools to the XRPL, allowing for decentralized trading and liquidity provision similar to leading DeFi platforms.