November 14 2025
XRP offers an attractive solution as short-term working capital for currency exchange platforms, especially given the speed of transactions, which are typically completed within minutes. This allows firms to quickly hedge liquidity risks by using XRP futures in situations where some liquidity lock-up is necessary. The concept behind this approach is to use local liquidity on both ends of a transaction, with XRP acting as a bridge. This strategy minimizes the time that funds are held, thereby limiting price discrepancies.
The recent forced rollback on October 10th, which saw order book depth disappear within minutes across major exchanges, was a reminder of how execution can depend on specific paths and how inventory can become trapped during periods of stress. Hedging opportunities have improved this year with CME Group’s introduction of XRP and Micro-XRP futures on May 19th, resulting in over $19 million in notional trading on the first day. This increases opportunities for finance departments that lacked access to regulated delta hedges in 2024.
The path to trading is relatively simple. Start by converting fiat to XRP on the most liquid markets in the origin country. Then, execute a spread trade via TWAP (time-weighted average price) or VWAP (volume-weighted average price), make the trade, and convert XRP back to fiat at the destination, thus obtaining XRP exposure in just a few minutes. Should a small hold accidentally become unavoidable, a short position in CME XRP futures can be opened simultaneously with the spot purchase and later unwound at the relevant stage of the trade. This not only reduces exposure but also ensures a smooth settlement without large unwanted divergences.
The time held in inventory significantly influences basis risk, with that risk increasing nonlinearly with holding time. A model examining the 95% VaR (Value at Risk) over annual volatility bands of 40, 55, and 70 percent shows that the windows for holding limits must be extremely narrow to keep drift within the Treasury's tolerance. At a 10 basis point VaR, the permissible hold time should be reduced to approximately 1,2 minutes at 40 percent volume, 0,7 minutes at 55 percent, and 0,4 minutes at 70 percent. When the VaR band reaches 25 basis points, the hold time may increase to roughly 7,5, 4,0, and 2,5 minutes, respectively.
These thresholds anticipate costs, spreads, and slippage, so operational buffers generally need to be even smaller. Effective risk management and a well-thought-out trading strategy are crucial for maintaining stability in this dynamic environment.
Kaiko's mid-year analysis found XRP to be among the best among altcoins in terms of one percent depth on audited exchanges, which provides important support for just-in-time execution when splitting and routing orders. Since depth is pair and exchange specific, routing should focus on the USD, USDT, and KRW markets, which typically trade larger volumes. XRPL's native decentralized exchange (DEX), including the AMM (automated market maker) introduced with XLS-30, provides topping for last-mile trades but not the primary volumes needed for larger operations. The XRPL DEX's volumes have remained around the multi-millions over 24 hours and approximately $178 million over a 30-day period, which is sufficient for smaller trades but not a replacement for the liquidity of larger central exchanges (CEXs). The advice for financial professionals is to always act as buyers and not as liquidity providers (LPs), given the impact on price and the risk of temporary losses.
Optimizing a micro-hedged vaulting approach can be very effective. Opening short positions in CME XRP futures concurrent with the spot purchase reduces delta exposure while transporting liquidity. In offshore markets, perpetuals can also carry high funding costs, which are unacceptable to many treasuries. Regulated CME contracts mitigate these hurdles, and the XRPL AMM can support last-mile fills where CEX books are thin, but the operational setup should avoid placing treasury teams in LP roles.
Risks should not be viewed as exceptions, but as inherent design requirements. Risks such as order book evaporation can transform minute-scale inventory into hourly supply if delivery occurs at a critical time. This became clear on October 10th, when such dynamics were observed. Furthermore, hedge liquidity can exhibit mismatches with the spot leg during periods of stress, which can widen the futures-spot basis.
The decision tree for trade execution can be summarized in three scenarios. When both ends can convert within 5-10 minutes, spot-only, just-in-time conversion at depth using central limit order books (CLOBs) offers the opportunity to keep risks within 25-50 basis points. If the process takes up to an hour, futures hedges should be employed, with staggered execution across multiple venues to mitigate basis drift and slippage. If regular holds extend over multiple hours, XRP is currently not a practical option for low basis working capital rails, as the costs of inventory, capital, and event risk dominate.
Looking ahead, it is essential that CME XRP futures maintain open interest and average daily trading so that hedgers can rely on intraday lows and a tighter base. Kaiko’s recent post-October discussions will provide insight into the recovery of low metrics for the fourth quarter. The EBA’s final technical standards will establish the European prudential framework for bank inventories, which will define the scope for just-in-time strategies within regulated treasuries.
In practical terms, coupling local liquidity with global payment systems is effective provided operations teams minimize settlement times, route orders through the deepest books, and always employ a regulated hedge when supply can’t be compressed into minutes. Global FX averages $7-8 trillion per day, meaning that even at $5 billion per day, XRP would represent roughly 0,06% of global FX turnover. This is small by macro standards but enormous in the context of cryptocurrency.
As a benchmark, $5 billion of XRP daily flow would be equivalent to smaller fiat corridors (e.g., MXN-CLP) and ten times the current peak levels of On-Demand Liquidity (ODL) that Ripple has indicated in public documents. This “just-in-time working capital” strategy means XRP could realistically handle between $3-8 billion per day in cross-currency settlements under current liquidity conditions. As the CME and regulatory framework develops, this could even rise above $10 billion per day.
How fast can transactions with XRP be executed?
XRP transactions can typically be completed within minutes, which is particularly useful for businesses looking to manage short-term liquidity risks.
What are the main benefits of using XRP for currency trading?
Benefits include fast conversion times, increased liquidity and the ability to combine different markets, reducing price differences.
What are the risks associated with trading XRP?
Key risks include the volatility of the price, the risk of liquidity during stressful periods, and operational risks such as protocol bugs or inadequate infrastructure.
Bitcoin (BTC)
Ethereum (ETH)
XRP (XRP)
