The largest ever RLUSD burn since its inception was recorded at 11:05 (UTC) yesterday, April 22, after an address incinerated 12 million tokens on the XRP Ledger (XRPL). Fascinatingly, the same amount was minted in less than a minute.
Researching the dynamics surrounding these kinds of transactions, we found that stablecoins of such quantities are usually burnt for different reasons. In most cases, the tokens are incinerated to adequately reduce supply and maintain the 1:1 peg with the US Dollar. The last time a significant portion of RLUSD tokens got burnt in a single day was when the team was preparing for its debut in December. At that time, 46.7 million tokens were incinerated.
More About the RLUSD Burn
In a recent post by XRPL dUNL validator Vet, it was disclosed that the 12 million tokens were transferred to the multi-signature wallet, which was earlier created by Ripple Deployer. In other words, a similar amount of RLUSD was replenished on the Ethereum network by the Treasury.
Highlighting the significance, Vet pointed out that the transaction marks a successful bridge of liquidity between two blockchains without necessarily subjecting the RLUSD in circulation to any level of increase. According to CoinMarketCap, RLUSD has a total supply of 294 million. Interestingly, 69% ($199.6 million) of this could be found on the Ethereum blockchain.
XRP Burning Mechanism and Impact on Price?
Last year, the burning mechanism of XRP was comprehensively explained with Ripple Chief Technology Officer (CTO) David Schwartz highlighting how it works. This mechanism was reported to work by permanently eliminating fees generated from XRP and RLUSD transactions from circulation. While the RLUSD transaction exists as a separate asset, it is reported to require XRP fees to be processed on the XRPL.
What this means is that as more people use the Ripple stablecoin, its transaction volume increases while the circulating supply gradually reduces. In the long run, this causes an upward surge in the price of XRP. As mentioned in our report, more of the XRP supply could be burnt in the future as demand for RLUSD increases with $100 million recently issued in just two days.
Currently, XRP’s circulating supply has marginally reduced to 58.39 billion as the asset trades at $2.2. In the last 24 hours, the price has increased by 7%, with its market cap increasing to $132 billion.
According to our recent analysis, XRP could likely hit $15 once the US Securities and Exchange Commission (SEC) also approves its related Exchange Traded Fund applications filed by the various issuers.
As discussed earlier, Bloomberg analyst Eric Balchunas has hinted that the XRP ETFs filed by WisdomTree, Coinshares, and Franklin Templeton could have their final decisions made before or on October 25.