In this edition of The Ripple Drop, we take a deep dive into liquidity. RippleNet General Manager Asheesh Birla joins us to explain how crypto liquidity works, why it’s important, and the roles On-Demand Liquidity and Ripple Liquidity Hub will play in driving its growth.
Rising Crypto Liquidity
Asheesh tracks the growth in crypto liquidity from the early days of Bitcoin and why it matters, noting that crypto is much easier to move around the world than fiat currency because it does not require a network of large banks and nostro accounts to achieve liquidity. This ability to easily interchange coins or fiat currency is facilitated by crypto exchanges like Coinbase, Bitso and Bitstamp.
Currently, Asheesh points out, hundreds of billions of dollars in crypto are traded daily on these exchanges, a dramatic increase from 2013 when the industry had yet to even cross a billion dollars in liquidity annually.
“More liquidity [means] we’re able to offer a better product experience. You can send cross-border payments for a cheaper rate,” he says.
According to Asheesh, the amount of crypto liquidity roughly doubles every year, which portends great things for customer savings and experience, especially in terms of cross-border payments.
Amidst this backdrop, RippleNet notched a banner year in 2021.
Asheesh says RippleNet ended the year with a payment volume run rate of over $10B and expanded our On-Demand Liquidity (ODL) product to 22 destination markets, observing that this milestone brings ODL near to complete global coverage.
Asheesh attributes this rapid growth to two distinct advantages offered by ODL versus traditional fiat movement and correspondent banking networks: its higher transaction speed and its more efficient use of capital.
He explains that the latter is key as rising interest rates could make capital even more expensive in the year ahead. Since ODL reduces the need for pre-funding, partners can avoid tying up that pricier capital in nostro accounts, magnifying their cost savings with ODL.
The continued growth in general crypto liquidity enhances this value proposition even further because it drives down base transaction costs, making it cheaper to send money faster and more efficiently using ODL.
Liquidity Hub for Business
The success of ODL is also at the root of our idea to launch Ripple Liquidity Hub, the enterprise-focused product previewed at Swell, which we’ve been leveraging for internal liquidity management as part of our ODL product for nearly two years.
As the clear leader in provisioning crypto liquidity through third-party market makers, Asheesh says companies began asking us how they could leverage our expertise to offer a variety of digital assets (such as Bitcoin, Ether and others) to their customers. Ripple Liquidity Hub is the forthcoming natural evolution of both those conversations and the existing RippleNet product.
Likened to how Google Flights or Kayak can aggregate pricing from multiple venues for booking travel, Ripple aims to provide a somewhat similar solution for liquidity that works behind the scenes. Ripple Liquidity Hub will build on existing Ripple infrastructure to integrate across multiple liquidity venues including exchanges, OTC desks and market makers enabling businesses to source digital assets at optimized prices. It will enable a simple integration for a turnkey experience, allowing Ripple partners to quickly offer their customers the ability to buy, sell and hold crypto with deep liquidity pools.
The response has been overwhelming, says Asheesh. Potential customers are excited by the prospect of Ripple Liquidity Hub because they trust Ripple’s expertise and track record to simplify what would otherwise be a daunting proposition.
Looking ahead, Asheesh predicts 2022 will be another big year for RippleNet and its products. In particular, he is energized by conversations with the RippleX team about NFT opportunities for RippleNet customers. He sees any possible collaboration as an example of our commitment to always be ahead of whatever’s next in crypto for enterprise.
Want to hear more? Watch the latest episode of The Ripple Drop for full details on these projects.