Vincent Van Code, a notable software engineer and cryptocurrency enthusiast, recently shared a detailed perspective on the potential impact of RLUSD (Regulatory-Linked USD) approval on XRP, the digital currency native to the XRP Ledger (XRPL). His analysis attracted comments from the crypto community, including critical responses from prominent validators.
Van Code’s main argument centers around the idea that the RLUSD approval will lead to a transformative shift in demand for XRP. He began by acknowledging the recent speculative price increase, where XRP rose from $1.90 to $2.35 following the RLUSD announcement. However, he emphasizes that this price movement is primarily driven by market speculation rather than fundamental utility.
People think #RLUSD is going to send #XRP to the moon immediately.
Here is my take TLDR;
1. RLUSD approval has pumped the price up from 1.90 to 2.35 (at time of writing this)
2. This is purely a speculative pump and not one driven by fundamentals
3. The real pump will happen…— Vincent Van Code (@vincent_vancode) December 10, 2024
Key Points from Van Code’s Analysis
Current Price Movements Are Speculative: Van Code argues that the current price pump reflects excitement around RLUSD rather than tangible use cases.
Future Utility-Driven Demand: He predicts that the “real pump” will occur once automated market makers (AMMs) and liquidity pools (LPs) are established on the XRPL. These setups, he claims, could enable users to earn around 5% annual percentage yield (APY) with minimal counterparty risk, potentially attracting significant capital inflows to the XRPL.
Exchanges and RLUSD Staking: He anticipates that exchanges will offer RLUSD staking, locking XRP on the XRPL to generate returns. According to Van Code, this will contribute to XRP’s demand by reducing its circulating supply.
Migration from USDT to RLUSD: Another key projection is that users may shift from holding USDT to RLUSD, transferring assets to self-custody wallets. RLUSD could then facilitate purchases of XRP, liquidity pool tokens, and other assets on decentralized exchanges (DEXs) operating within the XRPL ecosystem.
Challenges for Market Makers: Van Code concludes that these factors could lead to significant demand for XRP, overwhelming market makers, and price suppression bots, potentially causing a notable price surge by February 2024.
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Critical Response from XRPL Validator VET
VET, an XRPL validator, offered a critical response to Van Code’s optimistic analysis, raising several concerns about the practicality of his claims. He highlighted that RLUSD cannot currently be utilized in automated market makers (AMMs) and pointed out the lack of guaranteed yields from liquidity pools involving RLUSD.
Additionally, he emphasized the inherent risks of impermanent loss associated with AMMs, making them an unpredictable source of income for liquidity providers.
VET also challenged the assertion of “zero counterparty risk” in AMM pools, arguing that this claim is inaccurate despite RLUSD’s stringent regulatory approval. Furthermore, he noted that traditional staking does not exist on the XRPL and that staking through exchanges introduces counterparty risks, undermining the notion of risk-free returns.
Van Code’s Acknowledgment
In response to VET’s critique, Van Code conceded certain inaccuracies in his original post. He clarified that RLUSD presents “low counterparty risk” rather than “zero counterparty risk,” admitting the timeline dependencies tied to AMM clawback features.
While acknowledging the risks associated with AMMs and impermanent loss, he maintained that some users would prioritize long-term returns over potential capital gains.
The exchange between Van Code and VET highlights the complexity of assessing the long-term impact of RLUSD on the XRPL ecosystem. While Van Code envisions RLUSD as a catalyst for substantial demand and price growth for XRP, VET’s critique underscores the practical and technical challenges that could temper such optimism.
Disclaimer: This content is meant to inform and should not be considered financial advice. The views expressed in this article may include the author’s personal opinions and do not represent Times Tabloid’s opinion. Readers are urged to do in-depth research before making any investment decisions. Any action taken by the reader is strictly at their own risk. Times Tabloid is not responsible for any financial losses.
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