Alex Carchidi, The Motley Fool
6 min read
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XRP is seeing its liquidity deepen due to a recent technical upgrade.
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It's attracting a lot more institutional capital as a result.
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It has also significantly de-risked itself regarding a long-running lawsuit from regulators.
Most investors learn early that markets move when supply meets fresh demand. Right now, XRP (CRYPTO: XRP) changes hands near $2.25 per token. That doesn't scream excitement on its own. It does, however, set a remarkably low bar for upside if three key catalysts keep gathering steam.
Each one of these developments builds XRP's core narrative in durable ways. If they converge over the next 5 years (and they look like they will), a 100% move to roughly $4.50 per coin becomes a stretch goal rather than a fantasy.
What's more, the triggers are already visible on the blockchain, as well as in boardrooms. Let's examine these three catalysts, the risks they carry, and the signs to watch next.
In March 2024, the XRP Ledger activated its long-awaited automated market-maker (AMM) amendment, giving the ledger a built-in liquidity pool instead of relying solely on limit-order books. In other words, XRP's own liquidity can settle transactions right away, rather than wait for matching buy and sell orders. This upgrade to the chain, while technical in nature, has big implications for its attractiveness to institutional investors.
Liquidity providers (which effectively mean any players with large volumes of capital) can now earn fees without their money leaving the network, which is a change aimed at keeping assets parked on the chain rather than hopping to centralized exchanges.
Permanent liquidity matters because it compresses spreads and lowers slippage. These are price-stability qualities that institutions demand before routing large flows of capital through a blockchain. In other words, the new AMM helps large capital holders to transact more efficiently.
Assuming the crypto's AMMs keep accumulating assets, the network could become the cheapest place to swap stablecoins and XRP itself.
That would underpin durable transactional demand and create a self-reinforcing cycle wherein institutions can easily move and hold larger and larger amounts of money.
Over the long term, more and more assets will be tracked on blockchains. Assets that are tracked on chains are said to be "tokenized" because their ownership is represented by a crypto token. XRP is well positioned to be one of the leading blockchains on that front, capturing massive inflows from asset holders looking to tokenize and manage their capital.
