Here's why XRP whales may prefer US exchanges over offshore venues

In recent times, Ripple’s (XRP) order book on U.S.-based exchanges has witnessed a significant surge in liquidity, surpassing that of offshore platforms by a considerable margin.

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What is Market Depth?

Market depth refers to the capacity of a market to handle large buy and sell orders without causing substantial fluctuations in the concerned asset’s market price. This metric is quantified by analyzing the number of active buy and sell orders at various price levels. In the context of cryptocurrencies, market depth is an essential factor to consider when executing large transactions.

U.S. Exchanges See 30% Greater Order Book Liquidity

According to data tracked by CCData, U.S.-based exchanges, including Nasdaq-listed Coinbase (COIN) and Kraken, boast a 1% market depth of $1.12 million as of Thursday. This represents a 30% increase in order book liquidity compared to offshore platforms such as Binance and OKX.

Implications for Large Transactions

A higher market depth on U.S.-based exchanges implies that traders can execute large transactions with minimal slippage, thereby reducing the risk associated with price fluctuations. In other words, a trade transaction worth at least $1.12 million must be executed through U.S. exchanges to move the spot price by 1% in either direction.

Market Depth on U.S. Exchanges Sees Significant Growth

The 1% market depth on U.S.-based avenues has increased by 53% since July last year, outpacing the 43.2% improvement seen on offshore platforms. This growth is attributed to the relatively higher liquidity conditions on these exchanges.

Trading Volume in XRP Markets Sees an Increase

According to data from Paris-based Kaiko, trading volume in XRP markets offered by U.S.-based exchanges has picked up, although offshore exchanges remain dominant. U.S. platforms now account for 14% of the global XRP volume, matching levels seen four years ago.

Regulatory Uncertainty Dwindles

The relative improvement in trading conditions on U.S.-based exchanges likely stems from dwindling regulatory uncertainty. Since last year’s landmark court ruling, which granted Ripple Labs a partial victory against the SEC, demand for XRP in U.S. markets has grown steadily.

XRP Price Rallies Amid Regulatory Developments

Last year, fintech company Ripple scored a partial victory in its long-pending battle against the Securities and Exchange Commission after a court ruled that Ripple’s institutional sales of XRP, and not sales to retail investors, amounted to an unregistered securities offering. The regulator sued Ripple for violating securities law in late 2020, leading to the XRP price crash and prompting U.S. exchanges to delist the token.

Early this week, a federal court imposed a $125 million penalty on Ripple for its institutional sales of XRP. The amount fell well short of the $2 billion the SEC had sought, sending XRP’s price higher by 20%.

Conclusion

The increased liquidity and trading volume in XRP markets on U.S.-based exchanges are a positive development for whales looking to trade large quantities at stable prices stateside. As regulatory uncertainty continues to dwindle, it is likely that we will see further growth in these markets.