The recent correlation between the prices of XRP and XLM has attracted attention, leading legal expert Bill Morgan and Ripple CTO to use it as evidence against burning Ripple’s XRP escrow.
Abdullah Nassif, host of the Good Morning Crypto show, pointed out the remarkable similarity in the price movements of XRP and XLM, as both assets have been moving in the same direction for the past decade. This discovery has sparked curiosity about the underlying reasons behind this correlation.
Bill Morgan, an attorney based in Australia, commented on this correlation and suggested that burning Ripple’s XRP escrow would be ineffective. He pointed out that despite Stellar burning a significant amount of XLM, the price correlation 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 massive burn, which accounted for approximately 50% of the supply, the price of XLM hardly moved. Instead, XLM continued to trade in sync with XRP’s price.
Market observers argue that even if Ripple were to burn the XRP tokens currently held in escrow, XRP would still trade in a similar manner. This suggestion comes as members of the XRP community call for Ripple to burn the escrowed tokens, citing price suppression caused by periodic sales. 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. Morgan’s observation further supports the idea that burning the tokens would not have a significant 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, a member of the XRP community proposed that the correlation might be related to investor psychology rather than logical market factors. However, Morgan disagreed, stating that the lawsuit against Ripple, although impactful in the short term, did not alter the long-term price correlation between XRP and XLM.
Ripple CTO Schwartz also commented on the correlation, acknowledging its puzzling nature. He speculated that external factors outside the Ripple and Stellar ecosystems primarily drive the prices of both assets. Schwartz noted that even after Stellar burned half of its supply, there was no significant change in the price correlation with XRP, further supporting the argument against burning XRP escrow.
The Ripple CTO had previously expressed this sentiment while discussing what Ripple could do with the escrowed tokens. He believed that burning the tokens would be a waste of money, as it would not have a substantial impact on the price movements of XRP.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. The opinions expressed in this article are solely those of the author and do not reflect the opinion of The Crypto Basic. Readers are advised to conduct their own research before making any investment decisions. The Crypto Basic is not liable for any financial losses incurred.