Digital asset Ripple (CCC:XRP-USD) has been on a seesaw ride in 2021. Having started the year at 22 cents and hit nearly $2 in mid-April, it is currently hovering around 62 cents. Despite the recent decline in the altcoin space, so far this year, XRP-USD is up about 180%.
Crypto investors have been anxious due to an ongoing lawsuit of the U.S. Securities and Exchange Commission (SEC). In December 2020, SEC filed an action against Ripple for offering U.S. investors the XRP tokens, which were allegedly unregistered securities.
In their defense, Ripple argues that XRP is not a security but merely a currency. Earlier in the year, the company announced piloting an open-source XRP Ledger. It provides Central Banks a solution to issue their secure, controlled, and flexible digital currencies (CDBC).
Ripple’s argument was also backed up by John E. Deaton of the Deaton Law Firm and the website CryptoLaw. According to Deaton, “…Commission has failed to or chosen not to properly understand the fundamentals of crypto.”
The lawsuit might end in several ways. First, a pre-trial settlement is one of the possibilities, but this could create a bottleneck in the flow of XRP. Second, Ripple can lose the lawsuit, which would cause a major meltdown in the cryptocurrency universe.
Finally, Ripple can win, which would enable XRP investors to heave a big sigh of relief. Even in this case, SEC could continue going after other cryptocurrencies.
Given that the lawsuit might drag on until after 2021, investing in XRP-USD could initially feel risky. However, long-term investors whose risk/return profiles allow buying cryptos could consider buying in Ripple, especially if the price goes below 60 cents.
Cryptos Like Ripple Have Been Hot
RippleNet is a global decentralized network, connecting a broad ecosystem of payment institutions. Using the blockchain technology, RippleNet operates a platform allowing individuals to transfer money from bank account to bank account, person to person.
In addition to sending payments on-demand in real-time, users of the Ripple platform can attach data or documents, such as invoices. They can also see payment status easily. XRP-USD, its native token, is among the top 10 digital assets by market capitalization (cap) which currently stands at around $29 billion.
The past year has seen the popularity of commodities as well as alternative assets, including cryptos and tokens like Ripple, having surged. For example, here’s how some other darlings of the crypto space have fared so far in the year:
- Bitcoin (CCC:BTC-USD) — market cap of $593.8 billion, and up 8.7% YTD;
- Dogecoin (CCC:DOGE-USD) — market cap of $23.7 billion, and up 3,738.6% YTD;
- Ethereum (CCC:ETH-USD) — market cap of $221.4 billion, and up over 155.7% YTD.
Put another way, a portfolio of diversified digital assets would have meant double or even triple digit returns for crypto portfolios. According to the Oxford Business Group, “The rise is also attributable to investors looking to hedge against inflation, as governments ramp up spending and central banks print more money in an attempt to stimulate economic activity. Some have even gone so far as to argue that the rise of crypto is the beginning of the end for sovereign currency systems.”
Wall Street Is Interested In XRP and Peers
Growing number of companies like Mastercard (NYSE:MA), Microsoft (NASDAQ:MSFT), PayPal (NASDAQ:PYPL), Square (NYSE:SQ), and Visa (NYSE:V) have given support to cryptocurrencies. Earlier in 2021, Elon Musk of Tesla (NASDAQ:TSLA) made headlines with his environmental concerns. But he recently said Tesla would allow transactions in Bitcoin once mining uses clean energy sources.
Ripple was designed to transfer money, especially across borders, quickly, at very low fees. Long-term followers of XRP-USD expect it to gradually replace SWIFT, the current standard for international bank wires.
At present, a large number of financial institutions utilize the Ripple network. The platform has a network of over 300 providers across 50 countries. More businesses have been signing to use it for faster payments and remittances. Therefore, once the lawsuit is somehow settled, XRP could easily reach new highs.
However, if you are a short-term trader, you should exercise caution. The XRP-USD chart reveals that price is still consolidating, and there could be more selling ahead.
The Bottom Line on Ripple
Many crypto analysts believe digital currencies will be accepted increasingly in the coming years. Thus, the growth of tokens like Ripple seems inevitable. However, the legal dilemma currently restrains XRP from starting a new bull leg.
XRP’s price chart shows rapid and wide daily moves. Furthermore, it would not be possible to know the direction and the extent of the next move. Therefore, short-term Ripple traders should be cautious.
But if you are an investor with a two-year to three-year horizon, you could consider having an exposure below 60 cents. If RippleNet increases its partnership with global financial institutions and/or solves the legal issues with SEC, it is likely to continue creating value for XRP investors.
Finally, you could also invest in exchange-traded funds (ETFs) with exposure to the crypto space. Examples include the Amplify Transformational Data Sharing ETF (NYSEARCA:BLOK), the ARK Next Generation Internet ETF (NYSEARCA:ARKW), the First Trust Indxx Innovative Transaction & Process ETF (NASDAQ:LEGR), the Grayscale Ethereum Classic Trust (OTCMKTS:ETCG), and the Innovation Shares NextGen Protocol ETF (NYSEARCA:KOIN).
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.