When trade volume peaks, the Bitcoin and Ethereum networks become congested.
The team at Xpring has researched this phenomenon and concluded that traders opt to transfer funds using XRP during such periods of congestions.
The conclusion is similar to one made by Weiss Ratings back in July of 2018.
The XRP ledger is one of the fastest and cheapest in the crypto-verse. Transactions via XRP, irrespective of the amount, cost 0.0001 XRP and take approximately 5 – 7 seconds to confirm on both ends. It is this efficiency of XRP that traders opt to use the digital asset to transfer funds between exchanges. More so when the trade volume increases and congestion is witnessed on the Bitcoin (BTC) and Ethereum (ETH) networks.
Xpring Report Concludes XRP is Faster and Cheaper Transfering Funds Between Exchanges
XRP exchange inflows and outflows when Ethereum fees increase (congestion in the ETH network)
XRP-ETH trade volume during Ethereum network congestion.
In the first scenario, the report concludes that when gas fees on the ETH network increase, there is an increment in the cross-exchange transactions via XRP.
On days when Ethereum fees skyrocketed, XRP cross-exchange transactions also increased significantly. Overall, higher Ethereum fees correlate with higher volumes in XRP…
For example, on March 12, 2020, Ethereum transaction fees rose over 400%. That same day, XRP cross-exchange transactions rose 226%
For the second research topic, the report concluded that when there is an increment in gas fees on the Etheruem network, there is an increment in XRP/ETH trading activities. This implies there is a need for rapid conversions into the more efficient digital asset of XRP to facilitate the transfer of funds between exchanges.
It’s possible that traders do not hold enough XRP for rebalancing or liquidation, leading to converting their Ethereum into XRP, to use as a bridge currency…When there is a significant increase in Ethereum fees, there is also an increase in XRP/ETH trading activities.
Report Confirms a 2018 Poll and Observation by Weiss Ratings
The report by the team at Xpring further provides statistical data to a conclusion the team at Weiss Ratings made back in July of 2018. During this period, the trade volume was significantly high as a result of the 2017 crypto bull run. As a result, transaction fees on both the Ethereum and Bitcoin networks were also rising and traders opted for XRP to transfer funds between exchanges. A screenshot of the poll by Weiss Ratings can be found below.