The cryptocurrency world is no stranger to misconceptions and myths, and one of the most persistent ones is the idea that someone can “set the price” of a cryptocurrency.
This discussion of price setting came up again recently when Mickle (@xrpmickle) asked, “What would stop me from forking the XRPL tomorrow and setting the price of XRP2.0 to 1,000,000?” He stated that the ability to set prices of cryptocurrencies would result in an infinite money glitch.
Crypto Eri, a well-known figure in the XRP community, replied in a separate post emphasizing that decentralized crypto-assets like XRP cannot be “price set” arbitrarily. Instead, the price of cryptocurrencies is determined by supply and demand dynamics in the global open market.
She added “The deceptive false price hype shared by people who know better has unfortunately reached unprecedented levels.”
Decentralized crypto-assets like #XRP, cannot be "price set". Price is determined by supply & demand dynamics in the global open market, sometimes with Influence factors like trading, sentiment, adoption, news & liquidity.
The deceptive false price hype 👉shared by people who…
— 🌸Crypto Eri 🪝Carpe Diem (@sentosumosaba) September 12, 2023
It’s crucial to understand that cryptocurrency prices are influenced by various factors, including trading activity, market sentiment, adoption rates, news events, and liquidity. These factors, combined with the principles of supply and demand, create a complex ecosystem where prices are in constant flux.
An Infinite Money Glitch?
A supposed XRP community member, Utility (@UtilityFTW), who replied to Mickle said that setting prices could be done artificially. He gave an example, stating, “Say OPEC decided to say “We will now trade 1 barrel of oil for 1 XRP”. The arbitrage opportunity would almost immediately bring XRP’s value to the fair market value of a barrel of oil.”
In this case, he believes that setting the price of one barrel of oil would automatically set the price of XRP to the value of a barrel of oil.
Another user Vincent Van Code (@vincent_vancode) tried to debunk this point, stating that OPEC only sets the price of oil and not XRP. He also pointed out that it would require someone with deep pockets to buy up the exchange supply for this to work.
Read Also: New Report Shows Real Cause of Over 45% XRP Price Drop
Utility stuck to his opinion and highlighted that the U.S. government had done this before when they decided to pay a certain amount for gold, pegging the U.S. Dollar to hold. He described them as the “deep pockets” who set the price by deciding what they were willing to pay for it.
The idea of artificially setting the price of a cryptocurrency may seem tempting, but it’s not a practical strategy. As Crypto Eri pointed out, attempts at artificial price setting often result in excess supply, leading to a surplus.
In a global market, the principle of arbitrage comes into play. Arbitrageurs exploit price differentials by buying low and selling high, quickly eliminating any price disparity.
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