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As Ripple (XRP-USD) continues to trend lower, is now the time to buy XRP? Not yet. Its odds of getting out of its current mess with the Securities and Exchange Commission (SEC) may remain high.
Source: Shutterstock
Yet, while it stands to soar once again, on news of a courtroom victory, that doesn’t mean you can buy in at around 64 cents (where it trades today), and expect to see a tremendous gain in the coming months. A positive outcome from this issue may improve its fortunes. But, it’s hard to tell to what extent.
Especially, as the presumption it’ll prevail continues to be factored into its token price. A decision, even a settlement, is many months away. In the meantime, speculators with short time horizons could grow impatient, and its sell-off could continue.
Once that happens? Taking a chance here looks to be more worthwhile. With its current low utility relative to Ethereum (CCC:ETH-USD) and other DeFi-centric altcoins, the outcome of the case remains its only real catalyst. At today’s prices, risk/return isn’t much in your favor. But, after another big decline? Consider it more worthwhile as a speculative buy.
XRP and the Latest on SEC v. Ripple Labs
As I discussed when last talking about XRP and the court case, the extension of discovery pushes when this, it’s only catalyst, could produce a big boost in its token price. Yet, in terms of its chances of prevailing, it’s odds remain high.
So far, it’s been the SEC, not Ripple Labs, that’s been playing defense. Recent headlines may help to further bolster that view. On Jun 25, the securities regulator filed a motion to quash a possible deposition from one of the agency’s ex-directors (William Hinman). A possible reason? Hinman once declared that Bitcoin (CCC:BTC-USD) and Ethereum are not securities.
This could damage the securities regulator’s case, that the ongoing offering of XRP tokens constitutes an unregistered securities offering. Admittedly, this may not be as much of a bombshell as it appears at first glance. Yet, it may highlight how the SEC still has its work cut for it when it comes to penalizing Ripple due a quirk in how its token was established (with a centralized issuer, as opposed to the decentralization common with other cryptocurrencies).
But, before you run out and buy XRP, keep in mind two things. One, this case is the only big thing going on for this crypto right now. Outside of this, there’s little reason to go long. Second, given we’re still months away from any possible “news,” impatient traders who bought on the “rumor” at higher prices could grow impatient. For now, that makes buying at 64 cents not worth the risk. But, if their impatience results in another big sell-off? The price may be right to take a position.
Remember This is a One Trick Pony
As a niche token, designed to facilitate cross-border remittance on the Ripple network, XRP isn’t in the same league as the other leading altcoins, most of which have much stronger DeFi tailwinds. Instead, this token remains more of a “buy the rumor, sell the news” short-term trade on the outcome of the SEC suit.
The problem? Speculators already bought big on the rumor (that it’d prevail against the SEC). And, while it tumbled far from the highs it set prior to the May crypto meltdown, it still remains elevated, as a rumored victory continues to be factored into its price.
So, if that’s the case, why consider XRP at all? Wouldn’t this instead be a situation where the ship’s already sailed? For now, yes. But, a few months down the road? An opportunity may open up to enter a position, ahead of the “news” sending it soaring (temporarily) once again. How could this open up? It all has to do with the extended timeline.
In other words, depending on how impatient speculators long the token today are, you may be able to buy it at a low enough price, ahead of the “news,” and profit from a possible post-decision/settlement pop.
Bottom Line: Still a Better Buy Once Impatient Traders Cash Out
As mentioned above, the discovery phase was extended through October. Jeremy Hogan, an attorney regarded as an expert on the case, doesn’t see a settlement happening until at least September. This may mean, over the next two or so months, prices continue to drift lower, as the ideal outcome doesn’t happen fast enough for speculators.
It may be a stretch to say you’ll be able to buy at or near its past lows (around 20 cents), ahead of a decision/settlement. But, if you’re interested in XRP, due to Ripple’s chances of winning against the SEC, waiting for another double-digit percentage decline remains the best move.
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.
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