Ripple Challenges the World's Largest Banks, but Experts Warn of a Trap

Using its brokerage arm Ripple Prime, the company Ripple has provided institutional investors with the opportunity to conduct round-the-clock trading of contracts linked to traditional stocks, commodities, and currencies.

A key element of the entire mechanism is the use of the stablecoin RLUSD as collateral, which is expected to significantly streamline and accelerate capital flow.

The platform previously acquired by the company, known as Hidden Road, now operates under the Ripple Prime brand and allows large funds to trade swap contracts in a 24-hour mode, including on weekends. The offering includes connections to over a hundred markets, enabling positions on the prices of technology company stocks, gold, or oil during times when the exchanges in New York and London are closed. This venture is based on perpetual contracts offered by the Trade xyz platform on the decentralized derivatives exchange Hyperliquid, which Ripple Prime directly facilitates access to.

Initial market participants, such as the trading firm Virtu, have already confirmed their participation in the new project, viewing it as a complement to their existing strategies. Risk management and oversight of collateral deposits based on the RLUSD token are conducted under a license obtained in the British Virgin Islands, although the company's management aims to expand operations to additional jurisdictions.

Experts' Justified Doubts

However, the application of new technology does not automatically solve the key problem faced by every young financial market, which is the lack of sufficient depth and liquidity. In a special note directed to clients of HSBC, head of digital assets research Daragh Maher described Ripple's actions as an evolutionary rather than a revolutionary step towards the development of modern finance. He pointed out that while this market segment is developing extremely dynamically, its overall size is modest compared to the traditional investment space.

Finding a transaction partner at an acceptable price when positions worth millions of dollars are at stake can be extremely difficult during weekend sessions. The associated risk became evident during an event we described, when in just ten minutes, forced liquidation of leveraged positions in semiconductor sector stocks worth nearly 52 million USD occurred. The sell-off rapidly spread from the Binance exchange to the Hyperliquid platform in the absence of current valuations from the traditional market, revealing the vulnerability of new instruments to sharp price shocks.

The Future of Ripple Solutions

Before the market gains sufficient depth, activity in round-the-clock contracts will focus on a very narrow group of entities. According to forecasts presented by HSBC, in the early stages of service development, the main participants in transactions offered by Ripple will be market makers, proprietary traders, and hedge funds executing basis trade transactions. These strategies rely on exploiting temporary price differences between the underlying instrument and the derivative contract tracking it, rather than on strategically hedging long-term investment portfolios.

One thing is certain -- Ripple's long-term success in the described space will largely depend on whether it offers its clients cheaper, simpler, and more efficient collateral management compared to the current offerings of traditional brokers. Revenues generated from financing leveraged positions clearly show that the company is entering territory previously reserved almost exclusively for commercial banking. Time will tell whether the stable coin RLUSD and the technological backing will be enough to convince more conservative institutions that weekend stock trading is worth the risk.

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