This has likely helped the cryptocurrency find its post-crash floor, at prices just under $1. But, if Ripple fully gets out of the woods with regulators, does its coin have substantial room to run?
Putting it simply, the jury’s still out on that one. If it prevails in the Securities and Exchange Commission’s (SEC) suit, which alleges the issuance of XRP constituted an unregistered securities offering then chances are it’ll see another big jump.
This may be enough to send it back toward its recent highs around $1.83. Yet, in terms of it zooming to many times what it trades for today? That may not be in the cards.
As I discussed previously, altcoins with higher utility, like Ethereum (CCC:ETH-USD) and Cardano (CCC:ADA-USD) still look to be stronger plays for crypto investors wanting to diversify from owning just Bitcoin (CCC:BTC-USD). Unfortunately, XRP’s limited utility may mean limited runway.
That being said, this may still be a worthwhile buy as a near-term trade. Further progress from Ripple in its courtroom battle with the SEC could give this crypto boost. So could progress when it comes to upgrading it for the age of DeFi. Just keep in mind this still isn’t the best way to play emerging trends in the blockchain space.
Ripple and Continued Courtroom Progress
As the headlines continue to convey, the plaintiff in SEC v. Ripple is still on the defensive. As the judge makes rulings that are in favor of the under-fire crypto developer, it’s becoming more and more likely that will ultimately prevail, and put this mess behind it.
Again, this is why the price of XRP has held up relatively well, considering the meltdown that happened last month. It may have fallen substantially from early-to-mid May, going from around $1.65, down briefly to prices under 80 cents. But, finding its floor, it’s holding steady at around 87 cents as of this writing.
With the chances of SEC defeating Ripple with its lawsuit lessening, the downside risk may not be as severe as previously anticipated. That’s not to say an ultimate victory by the securities regulator can’t happen. If it does, expect a sudden drop back to the sub-25 cent prices seen at the end of 2020.
Since a drop like that seems increasingly less likely, those buying in today, in expectation of another zoom higher post-victory may not have to worry so much about this worst-case scenario playing out.
The flip-side is the risk that XRP has a more limited runway than many think. Unless it starts speeding things up with upgrades and changes, it may be tough for this crypto to generate triple-digit percentage returns in the years to come.
This Niche Crypto Needs to Up Its Utility
The largest issue with XRP is not the Ripple lawsuits. It’s the cryptocurrency’s still-limited utility. Essentially designed for use as a blockchain alternative to the SWIFT financial remittance network, it’s more niche compared to, say, Bitcoin or Ethereum, which have a wider variety of uses.
This factor could limit how much further it stands to gain, relative to the names rising in popularity thanks to the DeFi phenomenon. Yet, I wouldn’t go so far as to say it’s destined to get left behind, relative to other altcoins.
Third-parties are currently trying to drive DeFi integration, but Ripple itself needs to take the lead on this. If the developer decides to maximize its utility, via upgrades that make it a viable competitor to Ethereum and similar blockchains, XRP may have a shot of not only bouncing back to its recent highs but also possibly making new highs ($2 and beyond) as well.
What’s the takeaway here? This crypto may not be “doomed” by any means. But, for it to see a meaningful breakout in price, its developer needs to take charge, in order for it to live up to the expectations currently priced in by speculators.
Bottom Line: XRP Could Be a Solid Near-Term Play
It may be a bit short-sided to say Ripple isn’t doing enough for its native coin. Once the aforementioned lawsuit (hopefully) is behind it, the developer won’t be spreading itself so thin anymore. This may lead to the company enacting big changes that help drive prices substantially upward.
A few things still need to happen until XRP could experience an Ethereum-esque bump-up in value. But, with possible gains from a full-on victory against the SEC, at today’s price, it may still make for a solid short-term trading opportunity in the crypto space.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.