Stablecoin

when

USDC

Ripple's Chief Technology Officer, David "JoelKatz" Schwartz, has forecasted a potential spike in the upcoming RLUSD stablecoin's value on the <a href="https://yellow.com/asset/xrp" rel="noopener noreferrer nofollow">XRP</a> Ledger, hinting it could hit an astonishing $1,200 per unit before stabilizing at its intended $1 peg. This speculative surge, he noted, stems from initial supply limitations, speculative market interest, and the inherent dynamics of stablecoin trading.
In response to community discussions, Schwartz <a href="https://bitcoinist.com/ripple-cto-lusd-trade-at-1200-on-debut/" rel="noopener noreferrer nofollow">confirmed</a> that the theoretical surge to $1,200 was plausible. He clarified that “once RLUSD is live, early supply constraints might result in significant price volatility until the market finds balance.”
Illustrating this, Schwartz mentioned, “someone may be willing to pay $1,200 for merely a fragment of one RLUSD, just for the 'honor' of securing the first piece on the decentralized exchange.”
Despite the potential for such inflated listings, Schwartz reassured that the price is expected to stabilize quickly near the $1 mark as supply catches up with demand. He cautioned, “spending exorbitant amounts to acquire minimal quantities of RLUSD in the beginning shouldn’t imply a persistent price above $1.” These anomalies, he elaborated, are rooted in the fundamental processes of stablecoins, which involve minting additional units when demand spikes and burning them when it drops. This mechanism seeks to maintain the $1 peg but can lag in real-time trading environments, especially during launches when initial demand greatly exceeds supply.
Echoing his insights at a recent conference in Prague, Schwartz humorously warned about “bizarre scenarios” that might occur when RLUSD is first introduced. He even joked that some might pay triple its value just to be among the first holders. Although this pales in comparison to a $1,200 figure, it underscores the potential misconception of RLUSD as a speculative asset rather than a stablecoin.
Schwartz further explained the role of arbitrageurs in correcting such price discrepancies. “Arbitrageurs will align the price back to its target when it deviates significantly from its peg,” he remarked. This process involves trading advantages by selling at inflated prices or buying below the peg and redeeming at face value. He also advised users against "fear of missing out" investments, stating, “this isn't a quick-rich scheme.”
Ripple Software Engineer Neil Hartner noted parallels to previous experiences, recalling initial volatility in GateHub USDC during its launch, particularly during weekends when mint-and-burn processes were inactive. His insights highlight the vulnerability of stablecoins to temporary depegging when liquidity mechanisms are momentarily inactive.
Hartner also referenced Circle's USDC pricing incident in March 2023, where temporary depegging occurred due to liquidity constraints outside standard hours. He explained that stablecoins don't adhere to an automatic price fix; rather, their value is determined by market participants. In cases where selling outpaces buying at $1, prices may adjust until market forces restore equilibrium.
At the time of writing, XRP was trading at $2.40.

Why Ripple's New Stablecoin Might Trade at Mind-Blowing $1,200 Instead of $1: CTO Explains

Yellow News

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