Ripple’s Chief Technology Officer, David Schwartz, has expressed his belief that higher prices of XRP would significantly improve its effectiveness as a payment vehicle, attributing this to increased liquidity in the market.
In a recent statement spotlighted by prominent XRP influencer Crypto Eri, Schwartz responded to a question on Quora regarding the desire of institutions to keep XRP’s price low for payment transactions.
His viewpoint challenges the prevailing notion by emphasizing that higher prices of XRP typically correlate with enhanced liquidity, resulting in more cost-effective 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
The concern raised by a questioner primarily focused on the adoption of Ripple by banks and its potential impact on the market price of XRP. Schwartz addressed this issue comprehensively, shedding light on the underlying process.
Contrary to the notion that lower prices would be preferable, Schwartz maintained that higher prices would lead to increased liquidity, thereby enabling cheaper transactions. To illustrate this, he drew a comparison with Bitcoin (BTC), the largest cryptocurrency by market cap.
Schwartz explained that during a low-price period, where Bitcoin was valued at $100, using it as an intermediary currency for a $1 million transaction would result in significant price fluctuations. These fluctuations arise from the lack of liquidity when acquiring the necessary Bitcoin and converting it into the recipient’s local currency.
He further elaborated on this point, stating, “…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.”
Such practical challenges render Bitcoin impractical for high-value transactions. However, Schwartz highlighted the feasibility of BTC for such transactions now that it’s trading at over $26,000.
Schwartz attributed this possibility to the higher price of XRP, which necessitates a smaller fraction of the total asset for conducting large-scale transactions. He firmly believes that a similar principle applies to XRP, making it an efficient tool for handling high-value payments when priced higher.
In conclusion, Ripple CTO David Schwartz challenges the conventional understanding that lower prices of XRP are advantageous for payment transactions. Instead, he asserts that higher prices result in increased liquidity and enable cost-effective transactions, drawing a parallel with Bitcoin.