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Ripple’s Chief Technology Officer (CTO), David Schwartz, has shed light on the potential trading dynamics of RLUSD, a new stablecoin pegged to the US dollar. In a recent conversation with Crypto Eri, Hartner emphasized that many stablecoins rely on external entities or protocols for minting and redemption.
In this context, if minting and burning aren’t available 24/7, prices can decouple from the $1 peg on specific exchanges or trading venues. Hartner referenced Circle’s USDC depegging incident in March 2023 as an analogous parallel.
As a result of this, stablecoin prices are not fixed by algorithmic means but rather by traders themselves. In other words, the stability is maintained through market forces rather than a rigid price fix.
Regarding RLUSD specifically, Schwartz stated that if it were to trade at $1,200 on debut, he believes that could be due to two potential factors: The first one has to do with the fact that RLUSD will support smart contracts.
Source: bitcoinist.com
