Heres How Ripple Stablecoin Will Maintain Its $1 Price, While Schwartz Says RLUSD Will Boost Liquidity for XRP
A prominent XRPL validator explains how the Ripple stablecoin RLUSD could maintain parity with the dollar.Ripple's newly launched stablecoin, RLUSD, has been a subject of discussion in the XRP community following its debut on four exchange partners. The launch came shortly after Ripple secured regulatory approval from the New York Department of Financial Services (NYDFS). While many market participants expressed enthusiasm about the stablecoin, some misunderstood its role, expecting price volatility that could create profits. However, experts have explained why RLUSD will always remain pegged at $1.RLUSD Will Maintain Its $1 PriceVet, a prominent XRPL validator, recently addressed these misconceptions. In a disclosure on X, Vet pointed out the mechanism behind RLUSD's stability. Notably, he stressed that it ensures the price constantly aligns with $1. https://twitter.com/Vet_X0/status/1868610967333896522This mechanism revolves around Ripple's minting and redemption process. Vet explained that if RLUSD trades significantly above $1, say $589, market participants would immediately capitalize on this. Institutions would mint RLUSD directly from Ripple at a 1:1 dollar conversion and sell it for profit. This selling activity would create immense sell pressure, driving RLUSD back to its intended price of $1. Conversely, if RLUSD trades below $1, such as at $0.589, buyers would seize the opportunity to purchase it at a discount. They could then redeem it with Ripple for its full $1 value. The resulting buy pressure would force RLUSD's price upward until it stabilizes at $1. Notably, this self-correcting mechanism guarantees that RLUSD remains anchored to the dollar unless Ripple's minting and redemption system experiences disruptions. The efficiency of this system is paramount, especially considering previous cases of stablecoin depegs like the one involving TerraUSD (UST).Vet noted that the mechanism forms the backbone of RLUSD's stability. The minting and redemption capability ensures no prolonged deviation from the $1 peg. As a result, those seeking quick profits through volatility must understand that RLUSD is not an investment vehicle but a reliable stablecoin. Previously, Ripple CTO David Schwartz recently stressed this fact, issuing a warning to market participants who would want to FOMO into the project for this reason. RLUSD Could Boost Liquidity for XRPMeanwhile, Schwartz also discussed the benefits of stablecoin following the launch announcement. He emphasized that the stablecoin will enhance on-chain liquidity while expanding use cases for both RLUSD and XRP. https://twitter.com/JoelKatz/status/1868692620840710265According to him, the introduction of a trusted stablecoin like RLUSD will boost development and adoption on the XRPL network. Notable XRP community figure WrathofKahneman (WOK) also spotlighted this. He highlighted how RLUSD's benefits extend beyond burning XRP. According to him, the stablecoin's benefits lie in significantly boosting liquidity on the XRPL. This increased liquidity makes XRP more functional as a bridge currency and allows seamless value transfer between various assets. WOK noted that RLUSD's impact could grow further as new denominations emerge. With additional currencies making their way to the XRPL, bridging between these assets and XRP will become simpler and more efficient. This utility strengthens XRP's value proposition as a source of liquidity on demand. According to WOK, while the XRP price may see short-term upward movement due to RLUSD's launch, this increase would reflect market sentiment rather than RLUSD's direct usage. At press time, XRP trades for $2.57, up 7.33% over the past 24 hours.
Text source: The Crypto Basic
