Price won't rise because XRP is too fast!

Not true


The statement goes something like this: "XRP settles so fast that it will only be removed for 3 seconds at a time from the market; therefore the net XRP removed from the market will be -0- and it won't rise in value"

Common Sense Failure for this statement:

If you have a system, with all variables remaining the same except for the number of transactions, and then you go from -0- transactions to, let's say 100,000 transactions per day, this statement would have you believe that the initial price of the bridge asset used in each transaction will not move, even though the demand on the network has increased by a count of 100,000. 

It becomes obvious that you should stop and immediately discard this false notion. 

But if you need a further explanation, please read on.

Detailed Market Mechanics Failure for this statement:

xRapid works to 'lock in' all fees up front.  That means that the user - a remittance company perhaps - has to reserve an offer and bid on both the incoming and outgoing side.  That action - the reserving of a bid and offer - essentially removes both, making the next transaction go deeper in both directions.  We're taking offers and bids off the book with each transaction.  That will make the first leg asset (XRP) go up, and then it will make the second leg asset (JPY or any other asset) go up. 

1) This FUD assumes that there is no overlap of transactions: The only way that the price would remain unchanged is if there is zero overlap of all transactions, which is a ludicrous assumption, and it would imply that only 28,800 transactions happen per day (total seconds in a day divided by only a 3 second settlement time), using the exact same amount of XRP.  We say 'zero overlap' because if one transaction overlaps even for a half-second, then the second transaction must push the price of XRP higher in the order books.  So for there to be zero additional demand (net) there can be no overlap.  This assumption is ludicrous, and has never happened on any open exchange.

In reality, trades are asymmetrical, and they overlap, so they are not "cancelling each other out." There will be build ups of latent XRP in some accounts and shortages in others, after every transaction the system has to re-balance through further transactions flows. For proof, all you have to look at is the current effects on XRP price from a small volume trading spike.

The other assumption inherent in the FUD is that each transaction will have only one offer or bid that absorbs the entire amount of the transaction, without having to go deeper in the order book.  In other words, if multiple offers of XRP exist, but they are staggered at higher and higher prices to meet the size of the transaction, it will force upward price movement.  For example, what if a large transaction for a car is put through?  It will need to (most likely) access a variety of orders, forcing a temporary price rise in XRP, no matter if it settles on the other side. 

The response contained in this first point should be all you need to realize somebody told you a lie. But if you're still not convinced, keep reading:

2) This FUD assumes perfect and instantaneous arbitrage across exchanges: if the two legs of the transaction happen on different exchanges, the price will be impacted, even in the case of a ridiculous 'no-overlap' assumption - because arbitrage takes time - time that would then impact the orders and bids for the next transaction. 

3) This FUD assumes no active trading or speculation: The ForEx market is one example to look to for confirmation or a discarding of any fringe theories that you may hear about. The ForEx market where traders buy and sell currencies happens very quickly - in seconds - and involves massive volumes. This active trading adds significantly to demand, because the traders know that these currencies will be needed due to economic conditions. Given this, we can expect significant speculation to follow utility-driven demand for XRP as well.

4) This FUD assumes no institution will hold XRP: This FUD assumes that no institution will ever want to hold a bridge asset, which is yet another ridiculous assumption.  In reality, banks, remittance companies, credit card companies, and large corporates like Amazon hold enormous sums of bridge assets in their nostro-vostro accounts currently. 

5) This FUD assumes no existence of market makers: Someone needs to be holding those assets at each end for them to be able to make those offers. That someone is market makers. If there is competition between market makers, then that's a huge source of demand for XRP. The competition between market makers who are holding XRP and trying to bridge those payments at competitive rates means that they will have to have a steady supply of XRP available - i.e. they'll need to purchase it.




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