- A “significant correlation” has been identified between the price behavior of XRP and XLM.
- David Schwartz believes there isn’t enough XRP/XLM liquidity to cause a significant correlation in their prices.
- Schwartz observed three distinctive factors responsible for the XRP-XLM correlation.
A “significant correlation” has been identified between the price behavior of XRP, the native token of the Ripple network, and XLM, Stellar’s native cryptocurrency. Despite the observed correlation, Ripple’s Chief Technology Officer (CTO), David Schwartz, does not think there is enough XRP/XLM liquidity to cause a significant correlation in their prices.
Using data from CoinmarketCap, Schwartz showed how XRP and XLM have displayed similar price movements in the past year. This prompted the Ripple CTO to propose potential reasons behind the similarity in trends for both cryptocurrencies.
Schwartz noted three distinctive factors that could be responsible for both XRP and XLM moving in similar directions over long periods. Schwartz’s first factor is that all digital assets track each other significantly. He thinks the reason is that the market is still trying to figure out if they would be a thing, so industry news affects all tokens.
The second factor Schwartz thinks could have a similar influence on XRP and XLM is that all cryptocurrencies track Bitcoin because of its market share and the fraction of liquidity it claims from the crypto market. Hence, the price of other assets tends to change, if Bitcoin’s price moves.
Shwartz’s third likely factor on the XRP-XLM correlation revolves around the crypto community’s belief that both crypto tokens require similar conditions to succeed or fail. Hence, depending on the developments within the crypto industry, users react similarly to both cryptos, leading to a correlation in their price trends.
During yesterday’s market volatility, XRP and XLM dropped by approximately 5%. Both crypto tokens have also recovered from the losses while displaying chart patterns that resemble mirror images of one another.
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