David Schwartz, Ripple’s Chief Technology Officer, has issued a forewarning to the market concerning potential price swings for RLUSD, Ripple’s forthcoming dollar-equivalent stablecoin, as it braces for introduction.
Writing on X on December 15, Schwartz addressed investor anxieties around RLUSD’s imminent market debut, conceding the likelihood of initial supply deficits that might propel its price beyond its designated parity with the U.S. dollar. An exact release date for RLUSD remains undisclosed, and Ripple did not proffer a response to inquiries for remarks immediately.
Earlier in August, Ripple announced the commencement of trials for its new stablecoin on the XRP Ledger (XRPL) and Ethereum mainnet, with plans to harness RLUSD in facilitating cross-border payment services for its international clientele.
Schwartz communicated some pre-market valuation estimates for RLUSD, reaching up to $1,244, a phenomenon he attributes to the excitement amongst buyers eager for the prestige of owning the initial units of the stablecoin. “There actually is someone willing to pay $1,200/RLUSD for a tiny fraction of one RLUSD,” Schwartz referenced in his post, pointing to a Ripple wallet listing.
He was quick to reassure, however, that such inflated valuations are expected to be ephemeral, positing that “the price will recalibrate to very close to $1 as soon as the supply is steady. If not, it’d indicate a significant anomaly.”
Schwartz elucidated on the dynamics of market forces, highlighting the role arbitrageurs play in normalizing RLUSD’s price, who are anticipated to level out its value by selling at heightened prices and purchasing at or below the $1 mark, thus addressing the supply and demand imbalance.
“Please don’t give in to the FOMO with a stablecoin! This isn’t a gateway to wealth,” Schwartz added, underscoring his message.
This advisory surface as Ripple gears up to roll out RLUSD following its sanction by the New York Department of Financial Services on December 11.
Schwartz rounded off by reminding stakeholders of a stablecoin’s primary objective: to maintain a steady value. Despite potential short-term price fluctuations during the launch, the stablecoin is designed to uphold its $1 peg, he reiterated.
In tandem, XRP witnessed a surge to a seven-year acme earlier this month, climbing to $2.74—the peak price since January 2018—representing a fivefold increase over the preceding 30 days. However, XRP experienced a slight downtrend, nearly 1% over the past day, trading at $2.41, according to Coingecko data.
The nuances of these developments, particularly in the volatile realm of cryptocurrency, underscore the complexity and innovation present in the current financial technology landscape.