According to Versan Aljarrah, founder of Black Swan Capitalist, financial institutions may be more inclined to adopt faster and lower-cost cross-border payment infrastructure in an environment of tight global liquidity and rising financial costs. XRP Ledger is considered a potential beneficiary of this trend.
Cross-border payment efficiency re-pricing
The article argues that when market liquidity becomes more expensive, the importance of payment efficiency increases. Traditional cross-border transfers usually rely on multiple layers of intermediaries and can be processed for several days, with higher cost of spending and operating.
By contrast, XRP Ledger transactions are confirmed faster and at lower single cost. This feature is seen as the main reason for attracting banks, payment service providers and other financial institutions.
XRP is considered a bridge asset
At the heart of this view is that the XRP is not just a token within the network, but also a bridge between different currencies. According to the article, if the institution handles international payments, liquidity transfers or transfers of monetized assets through XRP Ledger, the demand for the use of XRP may increase simultaneously.
Logically, bridging assets reduce the need for agencies to pre-position funds in different regions, thus reducing the costs of settling and managing funds in cross-border settlements.
Deflation mechanisms are included in long-term narratives
The article also mentions the destruction mechanism of XRP Ledger. Each transaction permanently destroys a small number of XRPs on a small one-time scale, but if network transactions continue to expand, the number of XRPs in circulation will slowly decline.
The view cited by the author is that this could lead to a long-term narrative: on the one hand, institutions adopt enhanced use of the network; on the other hand, increased transactions would lead to continued destruction. The long-term supply-demand relationship of the XRP may be supported by a combination of the two.
However, it is also noted that this rate of destruction is per se mild and that what really determines the size of the role is whether or not XRP Ledger can be more widely used in realistic payment and asset transfer scenarios.