XRP may be emerging as a rebalancing asset for Ethereum users
The cryptocurrency market has been tough on many of the market’s cryptos, largely owing to the constant fluctuation in prices. XRP has been one such coin whose price has been restricted under $0.20 since the market crash in March. However, its low trading price and low transaction fees have provided an alternative to many Ethereum and Bitcoin users during times of network congestion.
The Bitcoin halving contributed to many price actions taking place in the market, a development that also resulted in unprecedented congestion on Ethereum and Bitcoin networks, according to a research report by Xpring. This congestion paved the way for increasing transaction fees that reached 5x regular fees. The high fees make the network unaffordable for many traders and a majority of the value can be lost in just paying the fees across exchanges.
However, according to the report’s data, many users may have found a solution in XRP for exchange balance transfers.
Ethereum’s transaction fees and gas price have been largely contributing to the health of the network. The users may have to pay a premium in order to prioritize their transactions and to be included in the block when the fees are already high. According to Xpring, during such a period, users opted for XRP cross-exchange transactions instead and the same can be visible in the chart below.
Higher transaction fees correlated with higher volumes in XRP. Similarly, when the market collapsed on 12 March, the frenzy caused a bump in ETH’s transaction fees by over 400%, while XRP’s cross-exchange transfers noted a rise of 226%.
This was possible as XRP is structured to process transactions at a minimal fee and with one of its use-cases being cross-border payments, cross-exchange transfers were easier for the digital asset to handle. The use of XRP as a rebalancing asset or as a bridge currency did not destabilize its low fees. Despite being a mediating currency, Xpring’s data reflected its use only during the congestion period on the Ethereum network.
XRP has maintained its low price since 2019, while the ecosystem has been expanding far and wide. Unlike other cryptos, the price of XRP has been strangely low and its fees have been low to add to its use case as a mediator currency. Ripple’s ODL services use XRP for the very reason of it being inexpensive on the user’s pocket in terms of transaction fees and converting it from one fiat to another fiat.