Tread Carefully With Ripple, Even as It Keeps Winning in Court

Continued legal battle victories, and the overall comeback in crypto, have helped to send XRP (CCC:XRP-USD), better known by the name of its developer, Ripple, back above $1 per token. Before the lawsuit filed against its developer by the Securities and Exchange Commission (SEC) wraps up, should you buy, ahead of it making another big move higher?

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Developments from the courtroom battle further hammer the argument that the SEC has no case. Closing the books on this issue will allow this altcoin to again focus its efforts into becoming a more widely used token, with greater utility.

Not so fast, though. That doesn’t mean that this crypto, pulling back now following the Sept. 7 flash crash, has room to make additional moves higher. Why? First, given so many traders dived into this ahead of its beating the SEC’s case, there’s a risk it pulls back post-verdict, in a “sell the news” situation. Second, even if “sell the news” doesn’t happen in a big way, legal victory alone isn’t going to be enough to send it to higher price levels.

It’s still lacking in usage and utility. At the same time, other altcoins are becoming more sophisticated. Given its challenges, and the fact the market has already priced-in its potential upcoming legal victory, it may be wise to hold off buying it at today’s prices.

Ripple Vs. the SEC

As you likely know, the Ripple development team appears very set to beat the SEC’s case against it. To recap, the securities regulator filed suit against the developer, accusing it of running an unregistered securities offering. News of this lawsuit not only sunk the price of its native token, crypto trading platform Coinbase (NASDAQ:COIN) also suspended its trading.

That said, the tough times didn’t last long for people holding Ripple. So far this year, it has successfully fought back against the SEC’s claims, putting them on the defensive. Coupled with booming interest in crypto (the May meltdown notwithstanding), this has enabled this altcoin to hit prices well above where it was (between 25 cents and 30 cents) at the start of 2021.

Recent headlines on the case still imply that the developer will ultimately prevail. However, it continues to be unclear when the case itself will wrap up. A tweet from Jeremy Hogan, an attorney that has provided ample commentary about the case, signals he believes the case will carry on into 2022.

More important than when the courtroom battle ends is how XRP will move following a final decision. The problem is that even if it beats the case, that does not necessarily mean it’s going to rip once again. In fact, this token may make a big move in the opposite direction.

Selling the News

In theory, Ripple should surge again after it gets this legal mess off its back. But in practice, it may not play out this way. Why? Many “bought the rumor,” and will want to “sell the news.” XRP has already surged around four-fold since the lawsuit first dropped, and it’s hard to argue that its price today does not factor in it winning in the courts. En masse selling could result in a big drop for it, whether a final decision comes this year, or at the beginning of next year.

Sure, you may be thinking about its other catalysts. For example, rumors of it getting back on Coinbase helped it temporarily bump higher on Sept. 9, before the major cryptocurrency exchange denied the rumors. That’s not to say it won’t eventually make its way back onto Coinbase. But beyond a temporary boost, it may not result in a permanent increase in its valuation.

Some may point to its potential to become a higher utility coin once it’s out of the woods with the lawsuit. In time, this could prove true. Yet any progress in this area won’t be immediate. This altcoin continues to have lower levels of utility relative to Ethereum (CCC:ETH-USD), as well as to DeFi (decentralized finance) capable “Ethereum killers” like Cardano (CCC:ADA-USD).

By the time it catches up, and moves beyond just being a medium of exchange for cross-border payments, it may be too late.

Be Careful With Ripple

For now, XRP is still over $1 per token. At today’s prices, it also still ranks in the top 10 cryptos by market capitalization. But even as it seems primed to beat the SEC’s case, you may not want to dive into it. An ultimate victory could mean a big “sell the news” moment, pushing it to lower prices.

Along with “sell the news” risks, its low levels of utility relative to its $50 billion valuation is a concern as well. Despite the encouraging headlines, be careful with Ripple.

On the date of publication, Thomas Niel held a long position in 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.

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