The correlation between XRP and XLM prices recently caught attention, with legal expert Bill Morgan and Ripple CTO leveraging it to dispose of the idea of burning Ripple’s XRP escrow.
Abdullah Nassif, the host of the Good Morning Crypto show, highlighted the uncanny symmetry in the price movements of XRP and XLM, as both assets have moved in the same direction for a decade. The latest disclosure again sparked curiosity about the underlying factors.
Australian-based attorney Bill Morgan weighed in, stating that this correlation suggests burning Ripple’s XRP escrow would be ineffective. He noted that despite Stellar burning a significant portion of XLM, the price symmetry with XRP remained unchanged.
I don’t know what causes it but it shows how useless Ripple burning the escrow would be. Stellar burned XLM and Ripple did not burn XRP and it had no impact on the symmetry. Same for the lawsuit. No impact overall. Stellar was not sued. Factors external to either blockchain and… https://t.co/2JZfZfTCx3
— bill morgan (@Belisarius2020) May 26, 2024
Stellar Burn Suggests XRP Burn Could be Useless
For context, the Stellar Development Foundation (SDF) burned 55 billion XLM in November 2019, valued at $4.4 billion at the time. However, despite the monumental burn, which represented about 50% of the supply, XLM’s price barely moved. Instead, XLM continued to trade in tandem with XRP’s price.
Market observers contend that XRP will trade in a similar fashion even if Ripple burns the XRP tokens currently held in escrow. This comes as XRP community members call for Ripple to burn the escrowed tokens, citing price suppression due to its periodic sales. For context, Ripple sold 841 million XRP in Q1 2024, and currently holds 39.7 billion tokens in escrow.
Ripple CTO David Schwartz has dismissed these price suppression claims. Most recently, Morgan’s observation implies that burning the tokens would have no reasonable impact on XRP’s price, as factors beyond the direct control of the XRP Ledger and Stellar influence the prices of both assets.
In response to the discussion, an XRP community member suggested that the correlation might stem from investor psychology rather than logical market factors. However, Morgan disagreed, asserting that the lawsuit against Ripple, while impactful in the short term, did not alter the long-term price symmetry between XRP and XLM.
I don’t accept that. The lawsuit in particular had a profound psychological impact on the XRP community. Impacts of the lawsuit itself and good or bad lawsuit news has usually being short term for days or weeks and did not substantially change the symmetry shown in that chart…
— bill morgan (@Belisarius2020) May 26, 2024
Ripple CTO Comments
Adding to the conversation, Ripple CTO Schwartz acknowledged the puzzling nature of this price correlation. He speculated that external factors outside the ecosystems of both Ripple and Stellar primarily drive the prices.
Schwartz noted that even after Stellar burned half of its supply, there was no significant deviation in price correlation with XRP, further supporting the argument that burning XRP escrow would be ineffectual.
The one bit that's the most convincing to me is that Stellar burned half their supply and there wasn't so much as a blip on their price chart or any real deviation from XRP's price correlation.https://t.co/x4qF9UuJvF
— David "JoelKatz" Schwartz (@JoelKatz) May 26, 2024
The Ripple CTO had echoed this sentiment in a previous statement while attempting to discuss what Ripple could do with the escrowed tokens. According to him, burning the tokens in escrow would only be a waste of money, as it would not have any substantial impact on XRP’s price movements.
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