In recent years, blockchain technology has fundamentally changed how money is transferred around the globe. Transfers take much longer now to settle; whereas, before there were no systems that would allow for instant settlement of transfers, today’s world has created an opportunity for systems capable of real-time settlement of transfers to be developed. XRP has emerged as one of the main tokens that enable this.
Both banks and payment businesses are beginning to evaluate instant cross-border payments and we can see how this will have an impact on XRP’s price and how people continue to exchange XRP.
What is also interesting about today’s cryptocurrency markets is that they are no longer solely being driven by hype. While there is still speculation within the markets, for example, what might happen to the price of a particular cryptocurrency; what we are also beginning to see is a lot more substance behind the driving forces of the market, including the actual performance of a network, the speed of transaction processing within that network, and whether or not major corporations or institutions are actually using their respective network. These factors are becoming increasingly important to all types of investors, ranging from day traders to institutional investors, which have had a substantial impact on the overall market.
At its heart, XRP is designed to help eliminate the friction and taint that exists when moving value across borders. This practical purpose has increasingly become one of the driving forces of the overall market and a large part of what will determine XRP’s price as the market grows and evolves.
Importance Of Real-Time Blockchain Settlement Transactions
Eliminating The Wait
Real-time settlement is primarily about removing the waiting period associated with international money transfers, which have historically caused delays. Blockchain networks can allow for instantaneous locking in of a monetary transfer, rather than waiting hours or days for your transfer to be processed. This speed advantage has positioned XRP as a bridge between currencies, as demonstrated by the trend towards high trading volume and rapid price response to news.
Increased Transparency
Transparency is one of blockchain’s primary strengths. Because everyone can independently verify a transaction on a public ledger, there is no guesswork involved in verifying a transaction, allowing participants to feel confident in the functionality of the blockchain system. When participants feel confident in the infrastructure of the system, money markets will function more efficiently by creating tighter bid-ask spreads and generating more logical price movements.
Reducing the Cost
When banks and finance companies are considering settlements on the blockchain, they focus on reducing the costs and expenses associated with traditional settlement systems. If cutting costs is one of the primary motivations for adopting a new product, then there are more eyes on the assets that will power those networks, as there are large institutions and retail traders. This increased interest will lead to positive buying pressure in the markets.
What actually links the price movements to settlement activity?
Usage of the network
When transactions are flowing through a blockchain network, it typically indicates that there are increasing numbers of people using this type of network for legitimate purposes. As the volume of real-time payment channels continues to increase and move into new markets, both traders and investors will pay attention to this growth as a positive signal of success; this often leads to upward price trends as well as noticeable increases in trading activity.
Money that moves into or out of the network
For real-time settlement to occur, there must be sufficient liquidity available to transact with; this means that as banks and payment processors connect to various blockchain systems, the liquidity levels of XRP will increase. Increased levels of liquidity without a corresponding increase in demand for XRP results in a much steadier price from day-to-day; however, it can also lead to faster and more extreme price fluctuations as trends develop.
What Traders Think Is Coming
Expectations are also important for determining how prices move. When new news comes out regarding new partnerships, or technology upgrades, or large institutions/companies start to use real-time settlement infrastructure, the emotional response of traders affects how they view the future price of XRP. The emotional response of traders then produces volatility until the market completes reevaluating.
Settlement Networks based on Technology
What Are Distributed Ledgers?
Blockchain-based settlement systems are built on decentralized networks, so there isn’t one organization that has complete control over everything. Instead of relying on one central authority, distributed ledgers utilize “consensus mechanisms” and require several parties to independently confirm that any transaction being processed is legitimate before it gets executed. This eliminates the need for a middleman and provides a quicker means of settling transactions for all parties involved.
Interconnecting Different Settlement Systems
In order for transactions to be settled in real-time, there must be connectivity between differing systems or “interoperability.” Interoperability is the process of creating connections between traditional banking systems and newer blockchain-based infrastructure. Connecting different networks and currencies at the connection points such as those created by XRP allows for seamless movement of XRP throughout multiple networks and payment environments where parties’ usage of diversified currency and platform is significant.
Financial Institutions Require a High Level of Security
Financial institutions or banks won’t participate in a system until they are completely confident that it is as safe as can be. They require strong encryption, thorough verification of transaction validity and several layers of protection. When there is high security infrastructure, audience members will see an increasing number of companies join the marketplace, and as new members join the marketplace, the marketplace will see a corresponding increase in activity as well as a long-term impact on the level of prices in the marketplace.
Comprehending Volatility & Risk Factors
While the growth of technology instills a sense of optimism for the future of cryptocurrencies, the volatility of the crypto markets will continue to be high. XRP does not experience price movements in isolation, it reacts to a number of things including large macroeconomic trends, regulatory actions and the level of risk investors are prepared to take globally.
The increased use of real-time settlement will not completely eliminate volatility, but it will provide traders with an increased sense of certainty regarding market pricing for XRP/USD.
In addition, it is important to keep in mind that crypto currency adoption will not occur in a linear fashion, there will likely be times when we see a lot of activity all at once – through new partnerships, increased usage and strong momentum – and then we will see periods of relative calmness, where the price will tend to level off or stabilize. During these calmer time periods, it appears as if the market is catching its breath before the next surge of news/events transforms the market again.
Consequences of All of This for the Big Picture
Inclusion of Institutions
When large commercial banking institutions and financial services organizations start actively testing or utilizing a blockchain settlement system, then the value of the digital assets that support those systems will become radically different than before. For example, XRP will no longer just be considered a speculative cryptocurrency, but rather (at this point) an essential component of the banking systems being developed by those institutions. Therefore, the amount of institutional confidence will result in an entirely new category of investor — those who had been previously hesitant to invest in such assets (on the margin), now will begin to invest in an asset or area that they have historically never had an interest in investing in.
Changing Ways of Paying Globally
The evolution of payment methods (real-time payments are occurring) are part of a larger disruptive change taking place in the digitization of banking systems globally. The method or structure of how money moves between countries, methods and structures of remittance and the way in which companies manage cash internally and with suppliers will move to digital methods and be redesigned. Digital assets utilizing blockchain technology such as XRP are playing an increasingly integral role in this new environment and, as such, over time will become increasingly strategically valuable as this transformative process is completed.
Intelligent Approaches to Trading
The numbers related to the blockchain provide a distinct competitive edge by giving traders a significant amount of information about their competitors’ trading activity. As such, an increase in the knowledge regarding the on-chain metrics from these public ledgers is leading to more informed trading decisions based on a better understanding of the trends that drive price movements – through the use of real-time data rather than charts and traditional TA for determining why XRP may experience price changes.
Conclusion
Blockchain settlement technologies are changing how money is transferred globally more than being simply a technical innovation. As long as Ripple’s XRP currency is tied to this technology, what happens in the underlying infrastructure is significant to Ripple and XRP investors. Any developments in partnerships, adoption rates, and volume usage on the network will all contribute to how the price of XRP acts as well as how traders will judge it to be priced at any time.
With banks and financial institutions continually working on creating/removing methods to send money quickly, at a lower cost, the relationship between settlement technology and market activity will not disappear. If anything, this relationship will continue to grow in importance. The analysis of these technological advances by observing them in actual trading activity will give you an idea of how much impact blockchain assets with real-world uses will have on the financial industry.
Also Read – How to Choose the Right Blockchain Hosting Provider? A Complete Guide
