Renowned crypto author Panos Mekras recently engaged in a heated debate within the XRP community regarding the impact of Ripple’s On-Demand Liquidity (ODL), now Ripple Payments, on XRP’s market value.

Mekras’ Argument

Mekras firmly stated the fact that Ripple’s solution for cross-border payments, though successful, does not guarantee to influence the price of XRP. Developers revealed that Ripple promotes its products, like ODL, as part of its business strategy. Yet, recent data shows XRP purchasers make independent investment decisions, not solely relying on Ripple’s efforts. 

According to Mekras, most ODL transactions involve immediate buying and selling of XRP, without generating significant demand for XRP from ODL itself. This perspective aligns with Ripple’s submission to the SEC, where they explicitly stated that most ODL transactions are demand-neutral and do not impact XRP’s price. Furthermore, Mekras points out that much of the XRP utilized for ODL originates from Ripple’s escrow, which introduces additional selling pressure by injecting “new” XRP tokens into the market. 

Consequently, Mekras concludes that Ripple’s payment solution alone cannot drive up the price of XRP. 

In this context, Ripple provided a document to the SEC stating that most transactions using On-Demand Liquidity (ODL) don’t affect XRP’s price. This suggests that the value of XRP isn’t heavily influenced by speculative trading but rather by its practical use in cross-border payments. This reinforces Ripple’s argument about the utility of XRP beyond market speculation.

In response to Mekras’ claims, community member Nietzbux offers another perspective. Nietzbux emphasizes the necessity of a highly liquid market and a higher XRP price for efficient ODL functioning. He argues that pundits like Mekras often overlook this critical aspect and suggest that the XRP community should stimulate demand for XRP through various utilities to increase its price.

Nietzbux finds this logic senseless, suggesting that it implies Ripple is relying on the community to generate the necessary demand and price increase for XRP. 

He presents a hypothetical scenario where a large bank wishes to transfer $100 billion using XRP, highlighting the impracticality due to the lack of liquidity. Nietzbux prompts reflection on why major banks haven’t embraced ODL fully and why ODL volume remains low compared to XRP’s total trading volume.

Bottomline

Interestingly, the connection between XRP’s price, Ripple’s promotion efforts, and ODL transactions shows the complex mix of technology, business strategy, and market dynamics. While Ripple’s ODL promotion boosts XRP’s adoption and utility, investors should look beyond this and consider XRP’s broader utility and adoption trends. As innovators and institutions drive adoption, XRP’s role in crypto may change, offering both opportunities and challenges for investors and stakeholders.

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