Over the last month, XRP (CRYPTO:XRP) has been struggling. While it is not down as much as the average cryptocurrency year to date, it has been declining in price since hitting US$0.89 on February 9.
Ripple Labs, the developers of XRP, are embroiled in a lawsuit brought by the SEC, which seeks to have the company disgorge all the profits earned by selling XRP. This lawsuit would impose immense costs on Ripple were it to succeed. Not only would the developers have to pay out $1.3 billion plus interest, but they’d also be regulated as issuers of securities from that point forward. It would be a big setback.
The reverse is also true. If Ripple were to win the SEC lawsuit, then it would not be regulated as a securities issuer and would not have to pay out $1.3 billion. If it settled, it would likely have to pay out a smaller amount. Depending on how things go, the SEC lawsuit outcome could potentially be bullish for XRP. In this article, I will explore why XRP could rally in the immediate aftermath of a win by Ripple Labs.
Why XRP is going down
XRP cryptocurrency is going down this year primarily because the entire crypto market is going down. All of the large market cap coins are down for the year. XRP is actually down less than most. Having started the year at US$0.85, it’s only down about 6% at today’s price of US$0.80. That’s in contrast to Ethereum, which is down over 20%. XRP has done better than many of its peers for the year to date.
The fact that XRP is falling less than the rest of the crypto market suggests that sentiment toward it is fairly bullish. Most people think that Ripple will eventually prevail in its SEC lawsuit. That could be part of why XRP is down less than other cryptos. In the next section, I’ll explore what could happen to XRP if Ripple Labs wins its SEC lawsuit.
Could a lawsuit win save it?
If Ripple Labs wins the SEC lawsuit, XRP could potentially rise. Certainly, the good news would create an atmosphere of optimism that XRP would benefit from. More importantly, though, it would ensure that XRP would continue to have Ripple Labs’s support. Were Ripple to lose the lawsuit, it would face enormous costs. It’s not outside the realm of possibility, and the combined regulatory and financial burdens could drive the organization into insolvency. So, a win would benefit Ripple Labs.
It could be benefit for XRP, too. If Ripple Labs isn’t financially destroyed, then it can continue supporting XRP. That means doing all kinds of daily tasks essential to keeping XRP relevant, including
- Blockchain upgrades;
- Recruiting vendors to accept Ripple payments via RippleNet;
- Generating publicity for XRP;
- And more.
The better a job Ripple Labs does with these tasks, the greater the demand will be for XRP tokens. The RippleNet thing is particularly important, because vendors accepting XRP helps drive demand for the token. So, Ripple Labs is very important to XRP’s future. If Ripple Labs wins the lawsuit, it will be able to thrive.
