Recently, in spite of a market wide crypto correction, the price of XRP has risen. This happened around the 19th September when Ripple Labs filed a motion of summary judgement to the US District Court - Southern District of New York, where the lawsuit between the SEC and Ripple is being heard.
Summary judgments are typically submitted when a party in a lawsuit believes that there is enough evidence for the court to make a ruling without the need to proceed to trial.
The main reason for the large price surge however, was that even the SEC, which had been unrelentingly pressing on with the lawsuit despite failing on many counts to prove that XRP was a security, also submitted a similar motion, calling on Judge Analisa Torres to make a ruling as soon as possible.
Background of the Lawsuit
This lawsuit started in December 2020 when the SEC sued Ripple in the Federal District Court in Manhattan, alleging that the XRP token was a security. The commission further accused Ripple and two of its founders for raising more than $1.3 billion through an unregistered securities offering to investors beginning in 2013. However, throughout the two-year lawsuit, the SEC has failed to produce evidence to substantiate their claim that XRP is a security.
One way of establishing that an asset is a security is to provide evidence of an “investment contract” being made between an issuer and a buyer. However, in the two-years of litigation, the SEC has not managed to produce such evidence.
Another way of proving an asset is a security is through the Howey test, where an asset would be deemed a security should its buyers invest in it hoping to profit from the efforts of the issuer. The SEC has failed to prove this point as well. Instead, it has agreed with Ripple’s argument that the profits investors derive from XRP would be a result of market supply and demand dynamics, not by the efforts of Ripple.
Is the SEC Throwing In The Towel?
As market participants read through the argument the SEC submitted, its weak case led traders to believe that the outcome would come soon, and that it would be in Ripple’s favour.
Despite failing to prove anything, in its summary judgement motion, the SEC argued that there can still be an “investment contract” without a contract, which many experts in the legal profession opine as being absurd. It is thus understandable that traders view this strange argument put forth by the SEC as a quick way to bow out of the lawsuit as it is getting clearer that they are not going to win.
XRP Historical And Recent Price Action
The XRP community cheered upon news of such developments, chasing the price of XRP up by around 50% in the week that followed as investors started to accumulate XRP again after a two-year hiatus that saw the XRP token miss out on the 2021 crypto bull market.
Before the lawsuit broke, XRP had been a crypto top ten coin with a consistently large trading turnover that was trading at an average price of around $0.65, even before the 2021 crypto bull market.
With its price languishing near the lows of $0.30 prior to the summary judgement developments, it seems reasonable for investors to want to quickly get their hands on XRP. Afterall, the lawsuit has caused the world’s largest crypto exchanges to delist XRP and thus, should a Ripple win be announced, exchanges would be sparing no effort to relist the token as soon as possible.
However, buying the token at its recent high of $0.56 would be buying it at near its average price before the lawsuit of $0.65, which may not necessarily be the best investment choice as the crypto market is currently in a bear cycle. There is also a waiting risk since the US district court has not yet made any announcement on possible rulings - such development could take several weeks, up to a couple of months, to be decided upon.
Hence, investors who want to bet that Ripple would win and for XRP to regain its former glory still have time to accumulate on a retracement, which is what its price is doing now after the initial adrenaline rush.
Is XRP a Buy Now?
Let us take a look at the technical chart of XRP to discuss where its price could possibly go. Readers do bear in mind that this is only the personal opinion of the author and should not be construed as financial advice. This is also not a solicitation to trade but is merely a discussion for informative reasons.
In the chart as seen below, XRP appears to have broken out of a double bottom that marked an interim low. The neckline of the double bottom was at around $0.40 - this level has since turned into strong support for XRP as shown where its price got retested there and rebounded.
Currently, price is around $0.44 where it may be building a base before attempting to break out of the downtrend that had pinned its price down since November 2021 (red dotted line). Should price continue to consolidate below but near the red dotted line, it is a good sign that a successful crossover may eventually materialise. The chance of this happening is high as there has been an exceptionally high volume of accumulation when price was trading near the double bottom low (blue shaded box).
Thus, with the successful break of a downtrend a high possibility, XRP looks like an attractive buy at current levels since it has pulled back from its recent high of $0.56. While an entry between $0.40 to $0.47 with a stop-loss at $0.30 or below would be a good move, traders may also enter a buy trade only after price crosses over the red dotted line when the bullish crossover is confirmed.
Possible take-profit levels could be around $0.88, or even $1.30 in the event a very positive momentum materialises.