Ripple is pushing a new upgrade to its XRP Ledger that will introduce a couple of very important features. In fact, the company’s CTO has, on multiple occasions, expressed his excitement over the upgrade and said that he’s very much looking forward to it.
But this has also sparked a discussion on the impact of the implementation on XRP’s price. Let’s dive in.
What’s The Fuss All About?
As CryptoPotato reported, Ripple is about to implement an upgrade to its XRP Ledger that will see the integration of two very important features: an automated market maker and a clawback feature. The first one is of interest for this story.
The automated market maker (AMM) will be non-custodial and should be integrated as a native featured to the DEX “in a way that provides increased returns to those who provide liquidity for the AMM and minimizes the risk of losses due to volatility.”
Per the technical specifications of the upgrade:
XLS-30 will bring a native Automated Market Maker to the XRPL that integrates with the existing order book DEX to enable trading of digital assets in automated liquidity pools and enable developers to address a wider audience of DeFi stakeholders. – reads the announcement.
What About XRP’s Price?
One user asked David Schwartz – the CTO of Ripple – whether this could influence Ripple’s price.
When AMM goes live, and a bunch of XRP holders start putting their XRP into pools, and since a lot of us only hold XRP… won’t the price of XRP tank since the AMM will be selling a bunch of XRP to balance the pools out?
To this, Schwartz said:
It’s true that if the AMM draws mainly from XRP holders, it will be a short-term net increase in selling pressure. I doubt that will be significant and might be even be outweighed by people going in the other direction.
The CTO also said that, in theory, the AMM should reduce the volatility by selling during price increases and buying during price decreases, essentially turning volatility “into yield.”