The XRP Flywheel Effect: Why Price Discovery May Become Inevitable as Corridors Flip

XRP is once again at the center of market discussions after new commentary from analysts highlighted how the long-term expansion of Ripple’s global payment network could eventually translate into higher public ledger activity and stronger price momentum for the token.

According to Jesse from Apex Crypto Insights, a factor investors often misunderstand is that most current payment activity on Ripple’s network does not yet use XRP directly. Instead, many banks and financial institutions rely on fiat-based settlement rails within RippleNet because they provide faster processing, lower costs than traditional systems like SWIFT, and eliminate cryptocurrency volatility risks. As a result, a large portion of institutional payment flows remains invisible to the public XRP Ledger today.

Three-stage adoption model shaping XRP’s long-term outlook

He describes Ripple’s expansion strategy as a multi-stage adoption cycle designed to gradually integrate XRP into global payment infrastructure.

Stage one (2017–2023): Institutional onboarding: During the early phase, Ripple focused on convincing banks and payment providers to adopt its technology using fiat-only settlement systems. This approach allowed institutions to benefit from faster and cheaper cross-border payments without needing to hold crypto assets. While this helped grow RippleNet’s global footprint, it meant that most transaction volume did not yet contribute to demand on the public XRP ledger, keeping direct price impact limited.

Stage two (2023–2026): On-demand liquidity expansion: The second phase, now underway, involves introducing On-Demand Liquidity (ODL) solutions that use XRP as a bridge asset between currencies. In an ODL transaction, funds are converted into XRP on one exchange, transferred across the ledger within seconds, and converted back into the destination currency. Each activation of a new payment corridor—such as U.S. dollar to peso or yen—turns previously private fiat-only volume into public XRP transaction activity.

Several corridors are already using this system at scale, including the Mexico corridor through Bitso since 2019 and expanding adoption across regions such as Asia-Pacific and parts of Latin America. Analysts note that as more corridors adopt ODL, daily XRP transaction flows could grow significantly, tightening spreads and increasing liquidity across exchanges.

Stage three: Network effects and liquidity flywheel: As more institutions shift to XRP-based settlement, liquidity is expected to deepen further, lowering transaction costs and encouraging additional corridors to adopt the technology. Over time, this “flywheel effect” could create sustained demand growth, particularly if major G20 currency corridors—such as U.S. dollar to euro or yen—move toward full ODL usage.

Why current private payment volume still matters for XRP

Although most RippleNet transactions today do not directly use XRP, analysts argue that the existing private payment volume effectively acts as potential future demand. Once institutions become comfortable with Ripple’s infrastructure and regulatory clarity improves, the economic incentive to reduce settlement costs—often estimated at 60% to 90% savings—could drive a gradual shift toward XRP-based liquidity solutions.

The expansion of automated market makers (AMMs), decentralized exchange liquidity, and institutional participation in providing XRP liquidity pools could further amplify transaction activity. In such a scenario, rising payment flows, increased trading activity, and growing speculative interest could collectively contribute to stronger price discovery over time.

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