Ripple: Sell The SEC Decision

Summary Ripple wins major victory in SEC v. Ripple Labs Inc. court case, with XRP being ruled not a security. XRP price initially spiked but then declined, following a similar pattern as seen in previous price trends. Long-term prospects for XRP remain uncertain, with limited evidence of significant institutional adoption and no major catalysts on the horizon. In this update, we will examine the magnitude of the Ripple court case decision, review the subsequent price action of XRP, and again review the long term prospects for the token. First, the Big News! As every investor now knows, Ripple ( XRP-USD ) scored a major victory in the Securities & Exchange Commission v. Ripple Labs Inc. court case. From Ripple's Q2 2023 XRP Markets Report , the company writes: The SEC's case against Ripple was filed in December 2020. From the very beginning we said we would defend the case not only on our own behalf but on behalf of the entire crypto industry in the U.S. and that we would ultimately come out on the right side of the law. Over two and a half years later, Ripple, Chris Larsen, and Brad Garlinghouse have been vindicated. On July 13 the Court unequivocally ruled that XRP, in and of itself, is not a security. XRP, along with BTC, are now the only two digital assets in the U.S. with that clarity although the Court's decision sets a key precedent that other market participants can rely on. The important takeaway from the case is that XRP is not in and of itself a security. This was heralded as a landmark decision for the entire industry. Previously, SEC Chair Gensler took the position that only Bitcoin ( BTC-USD ) was not a security while refusing to give clear guidance about any others. Price action post decision Quickly after the ruling -- and faster than I anticipated -- all the exchanges that previously delisted XRP including Coinbase, Kraken and Bitstamp made it available for trading on their U.S. platforms. And the price began spiking up. XRP price after SEC decision (Coingecko) The coin jumped to over $.80 right after the announcement and peaked somewhere over $.84 a few days later. But then, as predicted in my February update , In the opinion of this humble writer, the XRP price action will exactly match the LBC chart trend -- a huge spike on news and then an inexorable decline as retail buyers realize there's no "there there" and sell off. LBRY token post decision sell off (Coingecko) XRP post decision sell off (Coingecko) Comparing the LBC and XRP charts above shows the same phenomenon: a large spike followed by a return to near previous price levels. The best time to have sold XRP was during the first week after the legal decision. If you did and made money, congratulations! If you bought with a cost basis in the low $.40's and had good timing on the sell (above $.80) you could have had a respectable double for your efforts. But in all honesty the massive pump I (and others) expected just never materialized and the post announcement price action was disappointing. However with investing I've learned not to disparage any trade you can walk away from with profits. Long term market outlook for XRP The latest Ripple Markets Report contained no new data on ODL adoption and I'm afraid future reports will intentionally limit this kind of information. Why? From that report : While published in a good faith effort at transparency, these quarterly reports have been weaponized against the Company by the SEC. Ironic for an agency that touts transparency and disclosure. Accordingly, Ripple is re-evaluating the role and contents of this report going forward and will have updates on that front in Q3 2023. While we understand the rationale for the change, it makes the analysis of ODL adoption much more difficult. The good news for Ripple is that ODL is now available in close to 40 markets. The last published projected run rate for RippleNet was $15 billion for the year 2022, with about 60% of payments being ODL. So in doing the math, I estimated $9B ODL transactions for 2022. We do know that ODL via Malaysian partner Tranglo went from US$53 million in 2021 to US$970 million in 2022. This means Tranglo was about 1/9 of the estimated total for 2022. However any assertion around for ODL must be carefully examined. Despite claims that all Ripple XRP sales now are to ODL customers , questions have emerged about this practice. Forbes writer John Hyatt recently alleged that Ripple promotes XRP sales in lieu of actual remittances and cross-border payments using ODL (archive here ). In the Forbes article, Martin Walker, director of banking and finance at the Center for Evidence-Based Management, says that ODL is the new way for Ripple to sell XRP without with optics of dumping in the open market: With ODL Ripple lends XRP to partners like Tranglo, which then sell the cryptocurrency to exchanges and pay back the loans in cash. The terms governing Tranglo and Ripple's partnership-as described in SEC filings from InFinT Acquisition Corp., a Cayman Islands-based special purpose acquisition vehicle that has agreed to buy Tranglo's parent company-suggest that there are no limits to how much XRP Ripple can sell through Tranglo's ODL facility, irrespective of Tranglo's need for XRP. Ripple made $2.7 billion profit from "ODL-related" XRP sales in 2021 and 2022. Is Ripple selling XRP to bankroll the company through this ODL scheme? But bottom line, even at a legitimate $9B a year, RippleNet's ODL volume is still not a threat to the SWIFT network's huge trillion dollar a day market share. Increased ODL usage also has a near zero effect on the token price. With CBDCs, Bhutan remains the only country publicly committed to the Private Ledger platform. Nothing new is known about the status of the project and the CBDC Tracker site still lists it as a "proof of concept." The Central Bank of Montenegro (CBCG) has agreed to collaborate with Ripple to develop a digital currency strategy and pilot. This was an interesting announcement but provided no details on whether Ripple will implement their Private Ledger technology or simply act as a consultant. This project is listed in the "research" phase by CBDC Tracker as are the Colombian Banco de la República and Bhutan Royal Monetary Authority projects. Conclusion I've been researching the long-term XRP prospects for over three years now and still see very little hard evidence of the massive institutional adoption needed to drive the value of the coin. And now that a clear ruling was made in the Ripple vs SEC lawsuit, the XRP price will move only with the rest of crypto, driven by industry-specific events and retail investor sentiment. I see no great catalyst on the horizon to justify a position. In my opinion, Bitcoin and Ethereum ( ETH-USD ) have much greater upside in any upcoming bull run. Therefore, I have closed all my XRP positions and have no plans to invest again.