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Ripple Adds an Extra Layer of Risk That Just Isn’t Worth It Right Now

The case for cryptocurrency investors owning a basket of options makes sense. Ripple (CCC:XRP-USD) is among the most-discussed cryptocurrencies out there after Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD). XRP has found a niche in the crypto space, and investors have continued to pile in of late.

A concept image for the XRP (XRP-USD) token from Ripple.

Source: Shutterstock

XRP happens to have one of the best real-world use cases among its peers. This is something I think investors have taken note of when considering which crypto options they want to hold long-term.

As I mentioned in a recent piece, XRP was designed with a tangible use case in mind. Indeed, its use as a cross-border payment tool for international trading partners is an intriguing one.

The company’s underlying blockchain technology allows for the simultaneous settlement of such transactions. Indeed, as any company involved in cross-border business knows, exchange rate charges and banking fees to send SWIFT payments or direct bank transfers can be very costly.

This is a business that has been asking to be disrupted for a long time, and XRP appears to be the wave of the future.

Cryptocurrencies vary in terms of their perceived risks as a store of value. Having a real-world use case for a cryptocurrency removes a lot of the speculative element from investors’ valuation models.

That being said, there are a few risks with Ripple and XRP today investors should consider. I’m going to dive into two of the key risks I see with this crypto option for cautious investors.

Regulatory Headwinds Strong for XRP

Late last year, investors in Ripple were made aware of SEC charges against Ripple and two co-founders. The SEC alleged that two executives at Ripple raised over $1.3 billion in an unregistered online digital asset securities offering.

The SEC is making the case that Ripple’s digital assets are essentially securities, and proper compliance with federal securities laws must be followed.

That’s a big deal, and the associated drop of approximately 70% from peak to trough immediately following this news made sense.

Now, Ripple isn’t likely to be the only cryptocurrency affected by these regulatory headwinds. Investors have speculated that Stellar Lumens (CCC:XLM-USD) could be next up.

Both cryptocurrencies share a lot of similarities and functionality (and were created by the same co-founder). Indeed, there’s an argument that could be made that regulatory risk always existed for every crypto option.

However, in Ripple’s case, these charges are still pending. Therefore, many crypto exchanges such as Coinbase have delisted XRP and are awaiting the results of the pending action against Ripple.

On Mar. 19, XRP holders filed a letter with the Southern District of New York Judge hearing the case to plead for intervention. Indeed, XRP holders are hoping for an intervention to ultimately allow XRP to once again be listed. Subsequently, SEC lawyers filed a letter to the same judge to dismiss the proposed intervention.

And the plot thickens.

Regardless of what happens, this pending case is a big deal for investors.


In general, I view cryptocurrency investing as far too volatile, and therefore risky, for the average investor to consider. That said, there remains strong retail investor demand for these crypto options today.

For XRP holders and prospective investors, I think the fact XRP has been delisted is a key headwind that should be taken seriously. Yes, XRP has rebounded quite nicely since the lawsuit was announced and delistings began, thank you very much.

However, it’s too soon to say how this situation will all play out. There’s an incredible amount of speculation with the pending lawsuit alone, never mind the speculation required to own XRP in the first place.

For now, I’m on the sidelines, and anticipate I will be for the long-haul.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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