RLUSD Stablecoin’s Uncertain Launch: Insights on Expected Pricing and Risks Involved

Ripple’s Chief Technology Officer (CTO), David Schwartz, recently shared crucial insights regarding the upcoming release of Ripple’s new stablecoin, RLUSD. The expert emphasized that RLUSD might not necessarily trade at a fixed $1 peg on its debut.

This announcement comes as a vital reminder for investors and traders to understand the inherent risks associated with stablecoins, particularly those that rely on external entities or protocols for minting and redemption. In an earlier response to a tweet by Crypto Eri, Ripple’s CTO provided valuable context regarding RLUSD’s potential behavior at launch.

In essence, Schwartz explained that RLUSD might initially trade at $1,200 instead of the expected $1 peg due to various reasons such as limited liquidity, lack of market depth, and uncertainty in the early stages. This means that investors should not be surprised if they see an unusual or inflated price for RLUSD when it first comes out.

Stablecoins like RLUSD rely on their minting and redemption processes being operational 24/7 to maintain their pegs. However, instances such as Circle’s USDC depegging in March 2023, where liquidity was restricted outside of business hours, have shown that these stablecoins can suffer from price distortions under specific circumstances.

In the context of RLUSD, Ripple’s CTO has warned that there may be temporary deviations from the $1 peg. This warning underscores the importance of understanding the underlying mechanisms and risks associated with investing in stablecoins.

Ripple aims to revolutionize the world by making international payments faster and cheaper through its blockchain-based technology.

Source: bitcoinist.com