Xpring Report: Ripple focusing on trends like decentralized finance, XRP has a growing use case for retail investors

According to the report by Xpring’s Shae Wang named “How XRP Enables Faster, Low-Cost Cross Exchange Transfers”, XRP is finding use as a medium for transferring value between cryptocurrency exchanges. This is similar to how Bitcoin, Ethereum, and Tether’s USDT are used as a bridge between platforms because of their widespread adoption and liquidity.

Many users maybe shifting to XRP for exchange balance transfers

The report indicated that whenever Ethereum transaction fees skyrocketed, there was an increase in the number of XRP transactions sent between exchange accounts, along with the trading volume of the XRP/ETH pair. Especially, on March 12, 2020, Ethereum transaction fees rose over 400%. That same day, XRP cross-exchange transactions rose 226%.

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Figure 1. When ETH cost per transaction is higher, there are also more XRP cross-exchange transactions. This is especially true for days when ETH cost levels indicate severe network congestion. The metric we used is median cost; we see a starker effect when comparing mean.

However, there is still a degree of correlation between Ethereum transaction fees and XRP transactions.

The report indicated:

“This relation is weaker, but still existent, when Ethereum fees are within a normal range (medium to high) — and strongest when Ethereum is at its lowest and highest. This means when Ethereum fees lower, XRP cross-exchange transactions decrease.”

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Figure 2. Pearson’s R of >0.6 is an indicator of positive correlation. ETH cost is detrended here to remove trends, and a time-lagged analysis was performed. Cost levels are based on percentiles. (Note: ETH cost is a long-tail distribution and percentiles are adjusted to reflect levels accordingly. Low: <50% percentile, other buckets are evenly distributed.)

XRP was used as an exchange bridge

It seems that traders do not hold enough XRP for rebalancing or liquidation, leading to converting their Ethereum into XRP, to use as a bridge currency.

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Figure 3. High linear correlation does not mean two values move in parallel, it means that more often than not, they move in the same direction. Highlighted days are days when we saw the highest correlation between ETH cost/transaction and XRP cross-exchange volume.

When both Ethereum and Bitcoin fees soared, XRP fees remained stable. While traders may have switched to XRP to rebalance the exchange, it is no more expensive. When listed on exchanges as a base pair, this feature of XRP will remove the Blockchain load as a bottleneck for market liquidity.

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Figure 5. Median costs were plotted, but mean costs would show more extreme fluctuations and longer recovery periods in BTC and ETH cost per transaction.

Thus, it can be seen whether XRP is a cryptocurrency for banks and financial institutions. But, the asset has the investment potential due to the difference between the “tokenomics” of Bitcoin and of XRP.

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