- According to Ripple, XRP is perfect for arbitrage trading as it allows assets to move between exchanges quickly and cost-effectively.
- Both exchanges and traders can benefit from the technical advantages of XRP.
Many traders try to anticipate price movements and price trends by reading charts, and set their trades based on this. However, the so-called arbitrage trading, in which price differences between different exchanges are used to make a profit, is much simpler. Ripple explains in a new blog post why the digital asset XRP is perfectly suited for arbitrage trading.
XRP: Perfectly suited for arbitrage trading models
The transaction fees of Bitcoin or Ethereum are already significantly higher than those of XRP under normal circumstances. With high network utilization, this margin increases many times over. During the last crypto-crash on March 12, 2020, also known as “Black Thursday”, the average transaction fees skyrocketed to five times the normal amount in the network of BTC and ETH.
An analysis by Xpring has shown that users of exchanges switch to the digital asset XRP for value transfer during this time. The following chart illustrates these developments.
With near real-time transaction processing and the advanced distribution of XRP to more than 130 exchanges, the digital asset is perfectly suited to take advantage of price differentials. Many exchanges have started to offer XRP as a base currency that can be exchanged directly for fiat currencies.
Especially when networks are confronted with a transaction backlog, transaction processing via XRP continues to run smoothly without any delays. This means that funds can be sent quickly from one exchange with high prices to another exchange with low prices and traders can make a profit relatively easily or enter the market more cheaply thanks to this margin.
Curis Wang, CEO of Bitrue, describes how his exchange puts XRP at the heart of all trading activities, as the settlement of payments benefits greatly from using Ripple’s On-Demand Liquidity payment solution:
XRP’s use case makes it both practical and scalable so it made sense for our business to focus on it. As more people turn to RippleNet’s On-Demand Liquidity service for faster, cheaper global payments, Bitrue will grow alongside the increasing use of XRP. We took a chance on centering our platform around the asset and are now benefiting from being a fully integrated part of the XRP community.
Bitrue not only relies on ODL to process payments quickly and securely, but also offers users the ability to use XRP as collateral for crypto-covered loans to lend assets such as Bitcoin, Ether or Tether (USDT). Ripple notes that the high speed of XRP reduces the need for liquidity providers to hold large inventories of digital assets on multiple exchanges.
As soon as a new promising setup is created on another exchange, the funds can be sent to other exchanges within seconds. Although some exchanges have started to launch their own tokens (Huobi Coin, KuCoin Shares) as base currency, these often do not allow smooth trading, as they are not always accepted by other exchanges.
Ripple launches cloud payment solution
CNF reported that Ripple yesterday released a cloud solution for RippleNet to help companies integrate XRP and ODL. The so-called RippleNet cloud will make it easier for banks and financial institutions to integrate Ripple’s payment solutions into their own business processes. The implementation effort is significantly reduced, so that customers can get started with Ripple’s technology after just a few weeks.