Many traders try to plan price movements and price developments by reading charts and to base their trades on them. However, so-called arbitrage trading is significantly simpler, in which price differences between different exchanges are used to make a profit. In a new blog post, Ripple explains why the digital asset XRP is perfect for this.
XRP: Perfect for arbitrage trading models
The transaction fees from Bitcoin or Ethereum are already significantly higher than from XRP under normal circumstances. When the network is busy, this range increases many times over. During the last crypto crash on March 12, 2020, also known as “Black Thursday”, average transaction fees skyrocketed five times the normal amount in the BTC and ETH network.
An analysis by Xpring has shown that users of exchanges during this period primarily switch to the digital asset XRP for the transfer of value. The following graphic shows these developments.
Due to the processing of transactions in almost real-time and the advanced distribution of XRP on more than 130 exchanges, the digital asset is perfect for benefiting from price differences. Many exchanges have started offering XRP as the base currency, which can be exchanged directly for fiat currencies.
Especially when the networks are confronted with transaction congestion, the transaction processing via XRP continues to run smoothly without any delays. This means that funds can be quickly sent from one exchange with high prices to another exchange with low prices and that this margin makes it relatively easy for traders to make a profit or to enter the market more cheaply.
Curis Wang, CEO of Bitrue, describes that his exchange places XRP at the center of all trading activities since the processing of payments benefits greatly by using Ripple’s payment solution On-Demand Liquidity:
The use case of XRP makes it both practical and scalable, so it made sense to focus on it. As more and more people use RippleNet’s on-demand liquidity service for faster and cheaper global payments, Bitrue will grow with the increasing use of XRP. We have seized the opportunity to center 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 option of using XRP as security for crypto-covered loans to lend assets such as Bitcoin, Ether or Tether (USDT). Ripple notes that XRP’s high speed reduces the need for liquidity providers to hold large stocks of digital assets on different 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 the base currency, they often do not allow smooth trading because they are not always accepted by other exchanges.
Ripple launches cloud payment solution
Ripple 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 payment solutions into their own business processes. The implementation effort is significantly reduced so that customers can start using Ripple technology after just a few weeks.