Ripple says its latest on-chain analysis indicates traders are increasingly converting Bitcoin (BTC) and Ethereum (ETH) to XRP when transferring their balances to and from crypto exchanges.
The March 12th crash and Bitcoin’s rapidly rising price over the last two months triggered a sharp increase in crypto trading volume, at times raising the fees and slowing transaction times for BTC and ETH, the two largest cryptocurrencies by volume.
According to Ripple’s fundraising and development arm Xpring, traders are using XRP during those periods of heightened network congestion to ensure they can transfer their capital as fast as possible.
Xpring says the phenomenon is especially apparent on the Ethereum network.
“On days when Ethereum fees skyrocketed, XRP cross-exchange transactions also increased significantly (Figure 1). Overall, higher Ethereum fees correlate with higher volumes in XRP (Pearson’s R = 0.7, statistically this is a meaningfully strong positive correlation).
For example, on May 12, 2020, Ethereum transaction fees rose over 400%. That same day, XRP cross-exchange transactions rose 226%.”
As soon as traders complete fast and low-cost transfers using XRP, they can then exchange the XRP for the crypto asset of their choice. Although Ripple’s analysts see strong evidence that traders are turning to XRP to transfer balances and are reaping the benefits of “value-add” features, they note that correlation does not equal causation.
Ripple, which owns more than half of the 100 billion XRP in existence, says the digital asset’s fees have remained stable throughout the increase in market volatility and trading volume.
“Building an efficient and resilient network that makes moving money easy for everyone, everywhere is Ripple’s core vision. Strong evidence that these features are value-add for users gives our everyday work fulfillment.”