Ripple CTO warns of potential RLUSD supply constraints and price swings

David Schwartz, Chief Technology Officer of Ripple, has issued a warning to investors regarding the anticipated supply constraints and potential price volatility for Ripple’s new USD-pegged stablecoin, RLUSD, upon its launch.

Schwartz emphasized that while RLUSD is expected to settle close to its planned $1 parity once supply and demand return to normal, there could be significant price swings in the early days due to these market conditions.

Likely RLUSD supply shortages and price volatility

Schwartz highlighted that there may be supply shortages in the early days of RLUSD’s launch, which could lead to significant price fluctuations before the market stabilizes.

“As RLUSD goes live, there may be supply shortages in the very early days before the market stabilizes,” Schwartz stated in an X post.

“But rest assured, the price will come back to very close to $1 as soon as supply stabilizes. If it doesn’t, something is very seriously wrong.”

Schwartz emphasized that these short-term price changes due to supply or demand imbalances are typical around launch but are expected to be temporary as arbitragers step in to fix the market.

He explained that the early price swings will likely be driven by the novelty of acquiring the first RLUSD tokens.

For instance, one bid on a Ripple XRP wallet called Xaman, for instance, priced a portion of RLUSD at 511 XRP—more than $1,200—reflecting a speculative interest rather than its true market value.

This kind of high-priced transaction, Schwartz noted, is more about the “honor” of buying the first RLUSD tokens than an actual indication of market worth.

The CTO urged caution against “FOMO” (fear of missing out) into RLUSD, warning that this is not an opportunity to get rich.

“Please don’t expect the price to stay over $1 once things stabilize,” he advised.

“The whole point of a stablecoin is to have a stable price. Short-term changes are certainly possible around launch but should not remain for long.”

Schwartz explained that the primary goal of RLUSD is to complement Ripple’s XRP and increase its utility.

The stablecoin will leverage XRP’s extensive exchange availability to maintain a stable price.

Executives at Ripple have indicated that beta testing has shown promise in preventing de-pegging and enhancing global liquidity, which aligns with the company’s focus on supporting institutional participants.

RLUSD’s launch

The RLUSD stablecoin is expected to launch soon after it receives the final regulatory approval from the New York Department of Financial Services.

Ripple sees RLUSD as a valuable addition to its suite of financial solutions, intended to enhance cross-border payments and provide liquidity to financial institutions.

Executives at Ripple have expressed confidence that RLUSD will offer stability similar to that of other major USD-pegged stablecoins, benefiting from XRP’s extensive exchange availability to maintain its price stability.

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