In mid-July, XRP (XRP 1.14%) looked like it was easily going to soar past the $1 mark. Buoyed by news of a positive court ruling in its long-running lawsuit with the Securities and Exchange Commission, XRP skyrocketed in price from $0.48 to $0.95. For crypto investors, XRP was on a rocketship headed to the moon.
But not so fast. This is the crypto market we’re talking about, and volatility is the norm rather than the exception. The SEC has since said it plans to appeal the court ruling, and the legal process now looks like it’s far from being over. As a result, XRP has given up all of its summer gains and is now trading under $0.50, the same level it was trading at back in July. So can XRP rally once again this year in order to hit the psychologically important $1 price point?
XRP vs. the SEC
The ability of XRP to hit the $1 mark depends, to a large degree, on how the lawsuit with the SEC plays out. There are a number of different outcomes possible here. For example, the judge who ruled in favor of XRP might throw out the appeal from the SEC entirely, handing XRP a victory of sorts. Or, Ripple Labs (the company behind the XRP crypto token) and the SEC might come to a mutual settlement, simply in order to bring closure to a lawsuit that has been dragging on since December 2020.
The most likely outcome, though, is that we’re headed for the next round of a long, bruising fight. In a recent interview with Bloomberg, Ripple CEO Brad Garlinghouse noted that the company has already spent over $100 million defending itself from the SEC and has no intentions of stopping anytime soon. As Garlinghouse sees it, both the facts and the law are on the side of XRP, and the SEC is losing momentum in its attempted crypto crackdown.
However, this case still could go all the way to the U.S. Supreme Court. The highest court of the land would then be placed in the awkward position of interpreting U.S. securities law and determining the future of the crypto industry, which still lacks any sort of comprehensive regulatory framework in the United States.
The Ripple payment network
What’s frustrating, if you’re an XRP investor, is that the core business at the heart of the XRP token is a sound one. That business involves Ripple, a blockchain-based digital payment network that can be used for everything from sending remittances overseas and settling cross-border payments to transferring currencies. The basic idea here is that Ripple is a low-cost, ultra-fast way of sending money across borders, and that has made Ripple a valuable partner for some very large financial services companies.
Ripple, for example, has partnered with the likes of Western Union and MoneyGram International, and the current buzz in financial markets is that XRP could become an integration partner for the BRICS (Brazil, Russia, India, China, South Africa) nations, which are looking to create a multicurrency payment network that does not involve the U.S. dollar. Theoretically, at least, Ripple offers the sort of financial infrastructure that could make de-dollarization work.
And that brings up a very interesting question: Is Ripple going to cut ties with the United States entirely if the SEC lawsuit drags on? As a result of all the legal and regulatory headaches in the U.S. market, Garlinghouse has repeatedly made the point that overseas destinations such as Dubai, Singapore, and Hong Kong are so much more attractive for crypto companies. He also told Bloomberg that 80% of the company’s hiring is now coming from non-U.S. markets. So, if you’re thinking about investing in XRP, you need to be comfortable with the possibility that U.S.-fueled growth is going to be limited at best.
Proceed with caution
Based on the above, it’s hard to be optimistic about XRP. No matter how successful the Ripple payment network is, how many partners it signs up, or how much growth it achieves overseas, it all keeps coming back to the SEC lawsuit in the United States. XRP may trade sideways for the foreseeable future, until this legal situation is resolved.
From my perspective, the case for investing in XRP is just too speculative. There are other blockchain-based payment networks out there, so Ripple hardly has a monopoly in this space. And there are plenty of sub-$1 cryptos that don’t come with so much regulatory baggage. If you’re holding XRP tokens, I wouldn’t sell them — there’s always the chance of a big legal victory somewhere down the line. But I certainly wouldn’t be adding to a current position.