A recent community discussion has reignited the debate surrounding the eerie similarity in price movements between Ripple’s XRP and Stellar Lumens (XLM). David Schwartz, Ripple CTO and a key architect of the XRP Ledger, contributed his unique perspective on this crypto anomaly.
Commented on Ripple, XRP and XLM
Schwartz acknowledges this puzzling phenomenon. XRP and XLM seem to be dancing to the same tune despite belonging to different ecosystems. It suggests that external forces beyond individual ecosystems may be the puppeteers behind this synchronized price movement. But Schwartz, ever the pragmatist, admits there is no clear answer. He acknowledges that the problem is multifaceted.
One of the compelling arguments Schwartz offers is Stellar’s significant token burn last year. In a bold move, Stellar halved its total supply. Theoretically, this scarcity event should have pushed the price of XLM up. But to everyone’s surprise, the burn had minimal impact on the XLM price, and the price correlation with XRP remained stubbornly intact. This observation led Schwartz to believe that a similar burning of Ripple’s holdings of XRP may not be the silver bullet some investors were hoping for.
What does price parallelism mean?
So what causes this price unity? This is where things get interesting. Despite parallel price movements, XRP and XLM have opposite tokenomics. XRP has a total supply of approximately 100 billion tokens, with more than half (55.43 billion) currently in circulation. Its price hovers around $0.52, which translates into a market cap of $29.1 billion. XLM, on the other hand, has a total supply of 50 billion tokens, with just under half (28.976 billion) in circulation. Its price sits at a more modest $0.108, resulting in a market cap of $3.14 billion.
There is a connection in investors’ minds
The intertwined history of these two cryptocurrencies sheds light on their price correlation. Co-founded by Jed McCaleb, a former Ripple executive, Stellar was envisioned as a decentralized alternative to XRP. This common origin and overlapping functionalities likely created a connection in the minds of investors. When evaluating investment opportunities in the cross-border payments space, some investors may view XRP and XLM as interchangeable options, leading to an influx of capital that affects both prices together.
The mystery of the price synergy of XRP and XLM is far from solved. While Schwartz’s predictions provide valuable information to consider, further analysis is needed to fully uncover the complex web of factors influencing price movements. It will be interesting to see how future developments in the relevant ecosystems and the broader cryptocurrency market landscape impact this fascinating price relationship.
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