Frictionless payments

XRP’s history dates back all the way to 2004, a little known fact among crypto-investors and enthusiasts. However, the important part is that it is currently being leveraged by the cross-border payments company Ripple that’s looking to overtake SWIFT.

As far as a value proposition, XRP is offering the banking industry a complete makeover. Currently, banks are forced to maintain nostro and vostro accounts in several other countries in order to maintain business and be able to conduct international transfers. The XRP ledger solves that problem by making frictionless transactions possible through exchanges. The process, simplified, consists of converting the home currency to XRP, transferring it (within seconds) and finally converting XRP to the foreign currency required by the relevant bank. The latter offers banks the possibility to lower their operating fees and free-up capital that may soon become much-needed after the 2020 pandemic.

While the XRP ledger can be used for multiple other purposes, including micro-payments, the main contender here is frictionless global transfers.

Liquidity

For the utility token to serve its purpose, the number one crucial feature is high liquidity; in other words a very deep orderbook that can absorb very large orders. Hence why Ripple is very careful with their token distributions and ensures proper due diligence is done.

The ultimate liquidity will need both institutional and retail involvement and this will likely follow with overall cryptocurrency adoption as more participants enter the markets.

Price dynamics

XRP’s price is subject to basic supply and demand dynamics like any other asset on this planet. While the supply is fixed, the velocity of the asset is extremely high which isn’t the most favourable part for robust tokenomics, nonetheless, this is currently contained in some form with the large portion kept in escrow. The demand section, however, will likely increase as Ripple advances in the fintech world.

Global recession effect

With a global recession starting, spending being cut and unemployment on the rise, does this panic effect extend to XRP? Short answer, no.

XRP’s value proposition is frictionless payments which are required by banks on a consistent basis regardless of business being forced to close down. In fact, with banks being stress-tested and fighting for their survival, Ripple is handing them a rope of hope to cut down their expenses and increase their efficiency.

Banks, like any other business, are looking to cut down their operating costs by as much as possible right now. If they are able to free up billions kept in nostro and vostro accounts in exchange of giving up SWIFT, any rational bank shall do it. The days of complacency are over and survival mode has kicked in. This recession, more than anything else, can push banks to adopt Ripple’s technology powered by the XRP ledger.