Ripple CTO David Schwartz has suggested that the upcoming XRP Ledger (XRPL) AMM could contribute to buying pressure on XRP.
Ripple’s Chief Technology Officer (CTO), David Schwartz, recently engaged in an insightful discussion on X, highlighting how the upcoming XRPL Automated Market Maker (AMM) could impact the price of XRP.
Notably, a concerned XRP community member asked whether the launch of the AMM, where XRP holders will pool their assets, might lead to a significant drop in XRP’s value due to increased selling pressure.
In response, Schwartz acknowledged the possibility, stating that if the AMM primarily attracts XRP holders, it could initially create a surge in selling pressure.
It's true that if the AMM draws mainly from XRP holders, it will be a short-term net increase in selling pressure. I doubt that will be significant and might be even be outweighed by people going in the other direction.
— David "JoelKatz" Schwartz (@JoelKatz) September 12, 2023
However, he suggested that this selling pressure might be offset by a wave of individuals moving in the opposite direction, potentially resulting in an equilibrium or net buying pressure.
This statement captured the attention of the broader community, as it implies that Schwartz anticipates a substantial influx of buyers once the AMM goes live. The prospect of increased buying interest could positively impact XRP.
One community influencer expressed excitement over the idea, characterizing Schwartz’s remarks as a “hot take.” They pointed out that the Ripple CTO seems to expect massive buying pressure for XRP when the AMM launches.
Ripple CTO Cites Reason Behind His Excitement
Notably, Schwartz made the latest remarks while addressing questions regarding the AMM on X. As The Crypto Basic reported, he had earlier expressed his enthusiasm for the upcoming XRPL AMM, citing it as one of the features he is most excited about for XRPL.
When questioned about the reason behind this sentiment, he disclosed that the use of automated trading strategies by AMMs to harness market volatility is the primary driver of his excitement.
A few reasons, but the main one is that the use of an automated trading strategy to harvest volatility is fascinating to me
— David "JoelKatz" Schwartz (@JoelKatz) September 11, 2023
An XRP community member, Saul, raised a pertinent question about this strategy, seeking to understand whether “harvesting volatility” could also mitigate price swings or if it was solely focused on profit generation.
Schwartz clarified the matter, explaining that, in theory, harvesting volatility aims to reduce price volatility by strategically selling XRP during price increases and buying more during price declines.
This approach essentially transforms market volatility into a source of yield, potentially stabilizing the XRP price over time.
Notably, the XLS-30D Amendment, which is meant to introduce the XRPL AMM, is up for voting, having been included in the latest XRPL version, rippled 1.12.0. The AMM feature will go live once it receives validator consensus.