The recent correlation between XRP and XLM prices has attracted attention, as legal expert Bill Morgan and Ripple CTO have used it to dismiss the idea of burning Ripple’s XRP escrow.
Abdullah Nassif, the host of the Good Morning Crypto show, pointed out the remarkable similarity in the price movements of XRP and XLM, as both assets have moved in the same direction for a decade. This recent revelation has sparked curiosity about the underlying factors.
Australian attorney Bill Morgan shared his opinion, suggesting that this correlation indicates that burning Ripple’s XRP escrow would be ineffective. He observed that despite Stellar burning a significant portion of XLM, the price symmetry with XRP remained unchanged.
To provide context, the Stellar Development Foundation (SDF) burned 55 billion XLM in November 2019, which was valued at $4.4 billion at the time. However, despite this substantial burn, which represented around 50% of the supply, XLM’s price barely moved. Instead, it continued to trade in parallel with XRP’s price.
Market observers argue that XRP will likely follow a similar pattern even if Ripple burns the XRP tokens currently held in escrow. This comes as members of the XRP community call for Ripple to burn the escrowed tokens, claiming that their periodic sales suppress the price. To provide 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 claims of price suppression. Recently, Morgan’s observation implies that burning the tokens would have no significant impact on XRP’s price, as various factors beyond the control of the XRP Ledger and Stellar influence the prices of both assets.
In response to the discussion, a member of the XRP community 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.
Adding to the conversation, Ripple CTO Schwartz acknowledged the perplexing 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 the price correlation with XRP, further supporting the argument that burning XRP escrow would be ineffective.
The Ripple CTO had previously expressed a similar sentiment while discussing what Ripple could do with the escrowed tokens. According to him, burning the tokens in escrow would simply be a waste of money, as it would not have a substantial impact on XRP’s price movements.
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