Disclaimer: The datasets shared in the following article have been compiled from a set of online resources and do not reflect AMBCrypto’s own research on the subject
The last few years have been very disappointing for XRP users. For all the optimism, the altcoin hasn’t performed well on the charts. More than that, however, uncertainty has played a major role, with the SEC’s lawsuit against Ripple Labs not helping either.
The market performance is reflective of the fact that there is some cynicism and some sadness. With the lawsuit still not over, however, when can we expect XRP to appreciate on the charts again? Are the altcoin’s fortunes still tied to how the lawsuit ends?
Ripple, the leader in enterprise blockchain solutions, is a little different from its peers. Rather than focusing on retail customers, Ripple targets institutions. The cryptocurrency XRP has always been closely linked to Ripple. And, although these are distinct entities, Ripple holds billions of XRP in an escrow account.
That being said, the crypto still has a market cap of $17.6 billion. With more than $900 million traded in the past 24 hours, it’s obvious that traders and investors are very much interested in XRP.
Financial institutions and enterprises around the globe have started taking cognizance of the innovations in the financial landscape and how blockchain technology has impacted the space. With institutional blockchain adoption on the rise and XRP selling for record lows, is now a good time to invest in XRP?
In this article, we will look at the factors that influence Ripple and XRP and try to make sense of the news surrounding the sixth-largest crypto. Especially since it’s very important that investors make an informed decision.
Ripple, XRP, and everything in between
Ripple’s tie-up with Tokyo-Mitsubishi Bank in 2017 was a major milestone. Following the same, it became the second largest crypto by market capitalization for a brief period. A year later, Ripple was in the news again for its partnership with international banking conglomerate Santander Group for an app focusing on cross-border transactions.
In terms of rivals, Ripple has close to none at the moment. They are the leading crypto firm catering to financial institutions around the world. As the number of partnerships grow, by extension, XRP will reap the benefits. After all, it is the medium of exchange for all cross-border transactions enabled by RippleNet.
Ripple has been capitalizing on the need for quick transactions and other untapped potential in emerging economies, given that nations in Latin America and Asia Pacific regions are more likely to realize the value of blockchain and its tokens compared to their first world counterparts. With the rise of central bank digital currencies (CBDC), it is likely that developing countries looking to explore this option will go for Ripple since it already offers a well established cross-border framework. Increased adoption of CBDCs will also lead to banking institutions considering integrating crypto into their services. This will work out very well for Ripple since it RippleNet is already associated with a number of banks.
Blockchain solutions being offered to Ripple’s Central Bank partners wanting to venture into CBDCs include the option to leverage the XRP ledger using a private sidechain.
Ripple is predicted to develop rapidly over the forecast period, as it can be used for a variety of functions like accounting, investment, smart contract implementation, and decentralized programming.
XRP has an edge over its rivals due to its low cost of entry. The fact that a few dollars will buy tens of XRP seems appealing to new investors, especially those who prefer little investment.
According to a Valuates report, the cryptocurrency market’s size is expected to hit $4.94 billion by 2030, growing at a CAGR of 12.8%. A number of crypto-firms will benefit from this, Ripple among them.
The growth in the cryptocurrency market is spurred by an increase in the demand for operational efficiency and transparency in financial payment systems, as well as an increase in demand for remittances in developing nations.
The general idea is that RippleNet’s adoption by financial institutions will increase, leading to more recognition of the platform as well as its native token. This has also been factored in while calculating predictions for 2025 and beyond.
Given the ongoing crypto-winter, XRP has been on a downtrend lately, losing more than 55% of its value YTD.
XRP’s press time price was a far cry from its all time high of $3.84 in January 2018. As a matter of fact, its price was closer to its launch price than it is to its all-time high. As XRP fell from its all time high, so did its market capitalization. It was recorded to be $17.60 billion at press time.
Although XRP did gain somewhat over the past month, its year-to-date returns have investors worried.
SEC lawsuit and its impact
On 22 December 2020, the U.S Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs. The lawsuit alleged that Ripple had raised $1.3 billion through the sale of ‘unregistered securities’ (XRP). In addition to this, the SEC also brought charges against Ripple’s top executives, Christian Larsen (Co-founder) and Brad Garlinghouse (CEO), citing that they had made personal gains totalling $600 million in the process.
The SEC argued that XRP should be considered a security rather than a cryptocurrency and as such, should be under their purview.
A verdict in favor of the SEC will set a rather unpleasant legal precedent for the broader crypto-market. This is why this case is being closely observed by stakeholders in the industry.
It is evident that developments in the lawsuit have a direct impact on XRP’s price. Following the news of the lawsuit in 2020, XRP tanked almost 25%. In April 2021, the judge handed Ripple a small victory by granting them access to SEC’s internal documents, which caused XRP to rise over the $1-mark – A threshold that the crypto hadn’t crossed in 3 years.
According to a tweet by Defense Attorney James Filan on 15 August 2022, the U.S District Court for the Southern District of New York dealt yet another blow to the SEC when Judge Sarah Netburn granted Ripple’s motion to serve subpoenas to obtain a set of video recordings for the purpose of authentication, dismissing the regulators claim that Ripple was trying to reopen discovery. This was in response to Ripple’s motion filed on 3 August 2022.
In the Opinion & Order published earlier in July, Judge Sarah Netburn condemned the SEC for its “hypocrisy” and actions which suggested that the regulator was “adopting its litigation positions to further its desired goal, and not out of a faithful allegiance to the law.”
The lawsuit’s verdict, whatever it is, will have a lasting impact on XRP’s value. It is important to note that a verdict in favor of the SEC would make XRP a security only in the U.S because the regulator does not have jurisdiction across the country’s borders. This should offset some of the damage to Ripple, given that it has a substantial amount of business globally
Carol Alexander, Professor of Finance at the University of Sussex, believes that XRP is unlike any other crypto. She believes that if Ripple manages to beat the SEC lawsuit, it could start taking on the SWIFT banking system. SWIFT is a messaging network that financial institutions use to securely transmit information and instructions
In an interview with CNBC, Ripple CEO Brad Garlinghouse talked about the possibility of an IPO after the case with the SEC is resolved. Ripple going public will have a significant impact on XRP’s price action in the following years.
In an interview with Axios at Collision 2022, Garlinghouse further stated that the current price of XRP has already factored in Ripple losing the case. “If Ripple loses the case, does anything change? It’s basically just status quo” he added.
As for his personal opinion on the verdict, Garlinghouse is betting that it will be in favor of Ripple. “I’m betting that because I think the facts are on our side. I’m betting that because the law is on our side.” he remarked.
Curiously, support for Ripple and XRP hasn’t been universal really, with Ethereum’s Vitalik Buterin recently commenting,
“XRP already lost their right to protection when they tried to throw us under the bus as “China-controlled” imo”
In court and in papers
Ripple and the SEC’s lawsuit is not just restricted to the courtroom. The matter is often covered by the media with both parties having been featured in multiple op-eds, often criticizing each other. Just this month, the market watchdog and the crypto firm were the subject of a heated exchange through pieces published by the Wall Street Journal.
On August 10, SEC Chairman Gary Gensler reiterated his stance on the definition of crypto assets and their oversight in his op-ed piece featured in The Wall Street Journal. “Make no mistake: If a lending platform is offering securities, it . . . falls…