Ripple (CCC:XRP-USD) surged to a high of $1.96 on April 14, reaching its highest point in over three years, after Ripple executives filed motions to dismiss the U.S. Securities and Exchange Commission (SEC) lawsuit against them and the company.
In December, the regulatory body accused Ripple of conducting a $1.3 billion unregistered securities offering in 2013. Understandably, once the news broke, XRP cratered. This is an extremely news-sensitive industry. Hence, any good or bad news will have a massive impact on the price.
However, things are looking up on this front. Last week, the court dismissed the SEC’s request to obtain eight years of financial data on CEO Brad Garlinghouse and Chairman Chris Larsen.
A court document from Judge Sarah Netburn of the U.S. District Court for the Southern District of New York shows the court also denied other subpoenas soliciting the executives’ financial records.
The new turn in the SEC v. Ripple case makes XRP holders bullish on the coin once again. A positive resolution to the case will lead to the coin skyrocketing.
However, there are risks that you need to know before investing in XRP-USD. For instance, the openness of the Ripple network allows for vulnerabilities. That will irk regularity bodies and could lead to more legal pressure moving forward.
Additionally, Ripple Chairman Chris Larsen owns approximately a third of all XRP, and CEO Brad Garlinghouse also has a significant amount of the coin. That is too much concentration. And raises the likelihood of the price being overinflated.
As we will get to later in the article, Ripple faces a lot of competition within its sector.
SEC Lawsuit Is the Main Catalyst for XRP in the Short Run
Things are looking up for Ripple in its SEC case. When most other cryptos were surging, the lawsuit led to XRP’s price crashing to new lows.
Since that time, the price has recovered, aided by the fact that it looks like the SEC’s case is weak, leading to an upward trajectory for XRP.
In March, Magistrate Judge Sarah Netburn said that the Ripple coin has utility, dealing a big blow to the SEC’s legal argument.
However, a positive outcome is not set in stone. In the short run, XRP will continue to live and die by this court decision, though. One needs to keep up-to-date if you are invested in the altcoin.
Not All Hunky Dory
As I write this, XRP is sitting pretty. The SEC proceedings provide positive momentum, and the “XRP army” is demanding exchanges relist the token.
For several emerging economies, XRP is exactly the kind of lifeline that they need. It speeds up cross-border transactions, allowing for faster processing times and easier flow of capital. All of this is especially great for emerging economies lacking a robust financial infrastructure.
Plus, Ripple has excellent institutional support. German bank Fidor, First Abu Dhabi Bank PJSC, American Express (NYSE:AXP), Banco Santander Brasil SA (NYSE:BSBR) and MoneyGram (NASDAQ:MGI) have all taken to the digital currency. Plus, Ripple is always looking for new partners, and it has a large organization backing its efforts.
But is it risk-free? Not at all.
Firstly, XRP coins are pre-mined and already in circulation. Meanwhile, Bitcoin (CCC:BTC-USD) has a hard cap of 21 million, meaning that it will become more valuable over time, leading to big price increases that will serve as rich dividends for investors smart enough to get in on the action early.
Ripple also has a very nimble competitor in the form of SWIFT, the largest international payment network globally, as well as strong support from the banking sector.
Investors should know that Ripple is not decentralized like other cryptocurrencies, since it was specially designed for the banking and finance industry. Hence, it’s competing in a very fierce business segment.
Things Are Looking Bullish at the Moment
XRP bulls are back in full force. The number of large holders, those with 100,000 to one million coins, has increased by 150 this month.
In the long run, though, there are challenges. Ripple is looking to confront the “big cheese” in the financial services industry.
So far, it has managed to gain the trust of more than 60 major financial institutions worldwide. However, it will need to work aggressively to maintain its position and grow.
All things considered, I would buy XRP at the moment. The stars are aligned for positive price momentum in the short run. Whether XRP is a long-term bet remains to be seen, but you can say the same for the wider crypto industry too.
Hence, it’s not enough to dissuade investors looking to make some money trading this digital asset.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.