Intriguing XRP and Stellar (XLM) Correlation Deciphered, Here's Explanation

David Schwartz, Ripple CTO and one of the original architects of the XRP Ledger, shares his observations on the market in a new series of tweets.

First, Schwartz believes that prices are mostly rational, as everything expected is already baked into the price. Second, any radical change that is not clearly beneficial may be seen negatively by the market.

Another observation made by the Ripple CTO is that the prices of most digital assets appear to move in lockstep, implying that the market is likely to be controlled by factors that influence all digital assets equally. He cites the XRP/XLM correlation and provides a chart illustrating this.

The comments made by the Ripple CTO spurred the question of the likely explanation behind the intriguing correlation between the cryptocurrencies XRP and XLM.

XRP and XLM, which is the native cryptocurrency of the Stellar network, are two of the most prominent digital assets in the crypto space. Both coins aim to facilitate fast and low-cost cross-border payments, leveraging blockchain technology and innovative consensus mechanisms.

However, despite their different features and purposes, XRP and XLM have exhibited a striking correlation in their price movements, puzzling investors and analysts alike.

According to the Ripple CTO, the exact explanation for the correlation remains unknown, but whatever it is, he believes it has to be something that affects XRP and XLM almost equally.

Schwartz pointed out that while XRP and XLM are both being impacted by the same market forces as most other cryptos, this still does not explain why they track more closely than other pairs.

The Ripple CTO gives a likely explanation: "People put XRP and XLM in the same mental bucket due to their histories, and so factors that affect one are especially expected to affect the other. The same people tend to buy both and sell both."

Schwartz further added, "I don't believe some kind of manipulation or evil force is somehow making them track."

At the time of writing, XRP and XLM were mirroring the general price falls on the market, down 0.77% and 1.54% in the last 24 hours to trade at $0.565 and $0.11, respectively.