Ripple is set to launch a major new feature: XRP loans, expected as soon as December. This move could turn the token into a productive asset, going beyond just a transfer utility. However, analysts warn of liquidity and volatility risks alongside this innovation. Is it worth exploring or better to proceed with caution?
XRP holders have long been left out of decentralized finance. Unlike ETH or BTC, XRP has never been widely adopted as collateral in major DeFi protocols. This situation can be partly explained by the regulatory controversies surrounding Ripple. Add to this the more limited technical integration within the Ethereum ecosystem and EVM-compatible networks.
Uphold’s offering is a game-changer. Investors holding XRP will now be able to optimize their asset strategy without facing the tax consequences of selling. This feature is particularly relevant in a bull market where selling positions means giving up potential future gains.
The timing of this launch is no coincidence. XRP has recently broken through key resistance levels and shows favorable technical momentum. Trading volumes have also increased, indicating renewed institutional and retail interest. In this context, a lending service could catalyze additional demand for the asset.
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Borrowing against crypto collateral comes with inherent risks that every informed user must understand. The main danger lies in forced liquidation in the event of a sharp drop in the price of the asset placed as collateral. If XRP experiences a correction of 30% or more, under-collateralized positions will be automatically liquidated to protect the lender.
The volatility of XRP, although less pronounced than some altcoins, remains significant. Price movements exceeding 10% in a single session are not uncommon, particularly during periods of high speculation or regulatory announcements regarding Ripple. Borrowers will therefore need to maintain a comfortable collateralization ratio to avoid margin calls.
Another element to watch is the centralized nature of Uphold. Unlike purely decentralized DeFi protocols where smart contracts govern rules without human intervention, Uphold maintains control over operations. This implies counterparty risks and potential exposure to unilateral decisions by the platform. We’ve seen this with other centralized players in the sector during the turbulence of 2022.
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