Ripple CTO David “JoelKatz” Schwartz has explained that RLUSD—the upcoming stablecoin on the XRP Ledger—may initially trade at much higher prices, perhaps even $1,200, despite its $1 peg. Speaking of X, highlighted issues of early supply, perceived enthusiasm, and underlying markets for stablecoins as factors that could drive any short-term spike.
Why Ripple Stablecoin RLUSD Could Hit $1,200
In a public chat response with a screenshot showing the $1,200 RLUSD value in the Xaman wallet, Schwartz confirmed that such a value is theoretically possible. He noted that “as RLUSD goes live, there may be a shortage of inventory in the early days before the market stabilizes. There is actually someone willing to pay $1,200/RLUSD for a fraction of one RLUSD. Tools will show you the highest price anyone is willing to pay, even if it’s just a small amount. Maybe someone wants the ‘glory’ of buying the first RLUSD share on DEX.”
However, he was quick to emphasize that “the price will return very close to $1 as soon as supply stabilizes,” suggesting that any subsequent listing would be more of a novelty than a true test of the long-term market for RLUSD. value. “But rest assured that the price will return to close to $1 as soon as supply stabilizes. […] If you want to spend a lot of money to get a little bit of RLUSD before someone else does, you can. But please don’t expect the price to stay above $1 if things stabilize, which I expect they will very soon. “
Part of the reason for this confusion, according to the Ripple CTO, lies in the underlying mining and mining mechanisms that support stablecoins. Creating a Ripple stablecoin involves creating new units when demand rises, while burning is the process of removing units from circulation when demand falls. Both of these processes help maintain the $1 peg but can lag behind real-time trading. At launch, the imbalance between the number of tokens available (supplied) and those who want to buy them (demanded) may cause extreme initial price distortions.
Schwartz’s speech on social media is consistent with the points he made at the Emergence conference in Prague. He discussed the “weird failure scenarios” that might occur when the stablecoin goes live, jokingly mentioning the possibility that “people might spend more money to have RLUSD first.”
The scenario he described was someone paying $3—rather than $1—to claim ownership of a stablecoin. While that still pales in comparison to $1,200, the goal remains: that confusion, he said, may lead some buyers to mistakenly believe that the Ripple stablecoin may be a speculative asset rather than a stablecoin.
“Obviously it’s going to come back down from $3 to $1 as soon as someone gets enough of it,” the Ripple CTO noted, adding that this is where arbitrageurs play an important role. When the price of a stablecoin floats significantly above or below its peg, traders hold the difference, either selling at a premium or buying at a discount and redeeming at a nominal value. This process locks the price back to its target.
Schwartz also warned, “please don’t put FOMO into stablecoin! This is not an opportunity to get rich.”
Ripple Software Engineer Neil Hartner recalled that GateHub USDC was “always above $2 per GateHub USD” during its first automated market maker (AMM) phase, especially on weekends when GateHub’s hot and cold processes were not connected. internet.
There are many rare failure scenarios that you may not think about when launching a stablecoin 😂 @JoelKatz in Prague about 10 days ago. $RLUSD on the moon! 🤣
Funny things in this crypto space. pic.twitter.com/z71gwIJcL2— 🌸Crypto Eri 🪝Carpe Diem (@sentosumosaba) December 15, 2024
The key takeaway here is that most stablecoins rely on an external business or transaction and redemption protocol. When those processes don’t work 24/7—or when liquidity is limited outside of business hours—prices can drop from a $1 peg on certain exchanges or trading venues.
Hartner cited Circle’s March 2023 USDC cut event as another similar warning. “Price distortions can occur if grinding and burning are not available 24/7. The same thing happened when the USDC fell over the weekend in March 2023 because the markets were nervous and the Circle had limited revenue activities outside of business hours, Hartner wrote.
Community member Khaled Elawadi.XRP, asked how stopping mining or burning would logically distort the price of a stablecoin if the eventual fiat redemption remains at $1. “Surely, there should be a fixed price for buying and selling on DEX and other listed markets?” he commented.
In response, Hartner emphasized that the peg is not imposed by the algorithmic price adjustment of the universe but by the traders themselves. “You don’t withdraw stablecoins from an exchange, you trade them for fiat with other traders,” he explained. If more stablecoins are sold than buyers are willing to pay $1, the value of that particular exchange can slide until market participants or financial providers step in.
At press time, XRP traded at $2.40.
Featured image from YouTube, chart from TradingView.com