Amidst the upcoming launch of Automated Market Makers (AMMs), David Schwartz, Ripple’s Chief Technical Officer (CTO), expressed skepticism about its effectiveness in reducing Ripple’s [XRP] volatility.
On the 26th of February, David took to X (formerly Twitter), stating,
“There might be some trading strategies employed by humans today that make less sense with AMMs.”
He outlined that the AMM feature might change the current trading approaches employed by market players.
AMMs’ inability to mitigate price swings
Talking about its benefits, David emphasized,
“But in exchange, new strategies such as arbitraging against the DEX and bidding in the continuous auction are created.”
He also highlighted the potential of volatility harvesting through AMM, remarking,
“While volatility harvesting does, at least in theory, reduce volatility, I don’t think AMMs on the XRPL DEX will cause a meaningful decrease in XRP price volatility any time soon.”
He added that trading on the XRPL DEX pales in comparison to XRP trading volume on centralized exchanges and other platforms, stating,
“DEX trading activity is a drop in the XRP trading ocean.”
These comments by Schwartz coincided with a period where some supporters have likened XRP to a stablecoin.
They’ve noted the asset’s lack of significant price fluctuations, contrasting it with the broader market’s upward trend.
Will this influence XRP enthusiasts?
Hence, the amendment’s success, previously supported by 85.7% of validators, now faces a serious threat due to this development.
These setbacks have raised concerns within the XRPL community, prompting calls for a revised proposal.
Thus, the introduction of the AMM feature on the XRPL was postponed after certain validators withdrew their support due to the discovery of a minor bug that could impact its functionality.
However, at present the bug has since been rectified, and the latest amendment has garnered a 74% consensus among validators.