Expert Says Ripple Participating in XRPL AMM with Only XRP is Bearish for XRP

Prominent crypto author Panos Mekras has expressed reservations about Ripple potentially participating in the XRP Ledger automated market maker (AMM) system with XRP alone.

Mekras voiced apprehension about this following recent comments from Ripple’s Chief Technology Officer, David Schwartz. In particular, Schwartz was asked whether Ripple would commit some XRP tokens in its escrow wallets to the AMM system.

Ripple Participating in XRP AMM

Schwartz expressed uncertainty about the benefits of such an endeavor to the XRP ecosystem.

“I’m not sure if that would be a bad thing or a good thing,” the Ripple CTO remarked. 

Unsatisfied by the response, another proponent pressed further for a definite answer, especially considering Schwartz’s disclosure that the XRPL AMM is his most cherished feature on the blockchain.

In response, Schwartz reiterated his uncertainty about whether it would be beneficial for Ripple to allocate XRP from escrow to the AMM. He pointed out that by solely depositing XRP into an XRP/USD AMM, half of the XRP is sold at the time of deposit.

I don’t know if Ripple putting XRP from the escrow into the AMM would be a good thing. For one thing, if you put in only XRP into an XRP/USD AMM, at deposit time you are effectively selling half your XRP.

— David “JoelKatz” Schwartz (@JoelKatz) March 10, 2024

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XRP’s Price at Major Selling Risk

Essentially, Schwartz’s remark hinted at the possibility of Ripple engaging in the AMM solely with XRP tokens. On the premise, Panos Mekras, co-founder of Anodos Finance, joined the conversation. 

Mekras expressed concern that if Ripple were to participate in the AMM exclusively with XRP, it would effectively mean selling 50% of XRP for other assets in the pools.

He pointed out that such action would create a selling pressure that negatively impacts XRP’s market value.

“Ripple participating on the AMM only with their XRP is bad,”  Mekras remarked. 

Ripple participating on the AMM only with their XRP is bad, because that would be selling 50% of XRP for the other assets in the pools, and that will damage the price of XRP. Since Ripple has $1b+ in cash and sells 200-300m XRP monthly, the best solution is to provide both and… https://t.co/jYYq5fAy5x

— Panos ????{X} (@panosmek) March 10, 2024

Potential Solution

However, Mekras proposed a solution to this dilemma. He pointed out that since Ripple holds over $1 billion in cash and sells 200 million to 300 million XRP monthly, the optimal approach would be to provide both assets and avoid single-sided deposits.

“Providing equal value of at least few millions in $ and XRP is something that Ripple can easily do and afford,” he added.

Additionally, Mekras suggested that adding several XRP/stablecoin pairs would benefit Ripple’s ODL business in parallel.

Notably, these discussions have surfaced amid recent developments. In particular, the AMM amendment has once again garnered the required consensus from XRPL validators. The XRP Army expects its implementation on the XRP Ledger by March 22.