Investors will likely have to wait until late this year, or perhaps sometime next year for a conclusion to the Securities and Exchange Commission’s case against Ripple (CCC:XRP-USD) and two of its executives, alleging that more than $1.3 billion was raised through an unregistered, ongoing digital asset securities offering.
In the six days following the Dec. 22 announcement of the charges, the XRP price slid by more than half to 25.86 cents. Bitcoin (CCC:BTC-USD) gained almost 14% in the same period. Ethereum (CCC:ETH-USD) was up more than 15%.
This case holds importance not only for current and potential XRP holders, but also for the wider future of cryptocurrency regulation in the U.S. Perhaps no one — outside of those executives, Christian Larsen, the company’s co-founder and executive chairman of its board, and Bradley Garlinghouse, current CEO — is more closely watching the case than attorney Jeremy Hogan.
He is a lawyer who has become a go-to resource regarding opinions on crypto partly because of his YouTube channel, Legal Briefs. The crypto community is eager to understand when the case will be settled and Hogan’s opinion holds a lot of weight. And if we follow what he believes, then an end to the case won’t occur before September at the earliest.
How did he come up with that prediction? A lot of his reasoning is based on factual evidence regarding past SEC cases, only 4% of which ever go to trial. Of the 96% of cases which end prior to the start of a trial, 90% get settled in discovery. The end of the discovery period in SEC v. Ripple has now been pushed back and the close of fact discovery won’t occur until September or perhaps mid-October.
So, based on past case history there’s a 90% chance that the SEC v. Ripple case concludes around that time when discovery closes.
That prediction may or may not come to be of course. But it does serve as a handy tool for investors to work around. A lot of bullish investors who believe Ripple will be vindicated in its case and argument are now looking to time XRP prices.
Big Ripple Returns Are Evident
Despite that post-charge value drop, XRP didn’t stay down for long. By Feb. 10, it regained to 52.48 cents. Then it traded sideways for about eight weeks. April saw the today explode, running from 60 cents to $1.80 in less than two weeks. Cryptocurrencies were hot across the board and XRP was a proven entity with remittance and cross-border transaction utility.
XRP has since fallen with the broader cryptocurrency market, but its ability to provide quick returns is very evident. The thinking goes that XRP can retrace its losses and thereby quickly provide returns for those bullish toward its cause.
It could certainly do so through a combination of galvanizing forces. First, if the winds that brought cryptocurrency down change direction XRP will rise. Second, positive news regarding the ongoing SEC case will provide a quick boost to prices as well.
Those who count themselves among the more bullish XRP investors will jump in at current prices. Even at 66 cents, there’s a lot of upside if either of those galvanizing forces occur and push it above $1.
The more prudent approach would be to wait until XRP falls further and establish a position then. If XRP drops to the 30-cent range, and then retraces its former $1.80 highs, a lot of people are going to be extremely happy.
The bullish investment case looks like some variation of what I’ve just outlined. I believe that XRP makes sense, again because of its utility in the aforementioned remittance and cross-border transactions. It is cheaper and faster. Sooner or later, Ripple will be able to monetize that utility to a higher degree. That could mean that XRP moves well above its $1.80 historical highs.
Bigger Implications of Case
I’ll end this article by noting that XRP is interesting aside from the potential quick gains it can offer. SEC v. Ripple is going to prove to be a seminal case in the regulation of cryptocurrency in the United States.
Recently appointed SEC Chair Gary Gensler is vocal that there needs to be greater oversight around cryptocurrency in general. Jeremy Hogan’s opinion was that if a settlement wasn’t reached by the end of June, that the agency and Gensler supported this case for better or worse. I take that to mean that the SEC is entrenched and will pull out all of the stops to make XRP its crypto whipping boy at this point.
So, although easy returns are potentially there for XRP, the regulators are doing their best to gain further oversight into U.S. cryptocurrency.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.