With cryptocurrencies possibly starting to rebound, should you dive into XRP-USD (CCC:XRP-USD), the coin that’s often colloquially known by its developer’s name, Ripple? Not so fast.
Sure, as the panic fades and crypto investors get back into Bitcoin (CCC:BTC-USD) as well as other leading altcoins, we may see more high, across-the-board moves in the short-term. That’s even as there’s still uncertainty about the current rebound, which may be little more than a dead cat bounce.
But, unlike most of the other coins in this asset class, XRP-USD has another big risk hanging over it in addition to a continued selloff. I’m talking about the litigation against Ripple by the U.S. Securities and Exchange Commission (SEC).
A few weeks back, it seemed like Ripple was soon set to escape the hot seat. However, it’s not a certainty that Ripple will come out on top against regulators. We’ve already seen one development that could be a concern. And if there are more to follow? That could end XRP’s recent rebound to the $1 level.
Plus, add in the fact that other altcoins have growing usage and greater utility and there’s little reason to buy XRP today.
Ripple, Its Continued Legal Battle and the Impact on XRP
As you may know, the SEC’s main allegation is about the way Ripple sold XRP — namely, that it constituted an unregistered securities offering. At first, it looked like these claims would stick. However, as the case has played out, it’s starting to seem like Ripple has the upper hand.
That said, recent news may mean that this developer is anything but “in the clear.” As InvestorPlace’s William White has noted, the judge in this case recently gave the SEC go-ahead to obtain transactional data on XRP from foreign regulators. This alone doesn’t immediately swing things back into the regulator’s favor. However, it does highlight the difficulty of predicting the outcome here.
Even so, XRP still trades like it’s going to prevail. But a problem will arise if further out-of-favor developments rear their heads in the coming weeks. If more negative news piles up, it may bring XRP’s post-crash rebound to a screeching halt. Or, perhaps send it falling back further toward recent lows.
Admittedly, there is a third way this litigation could play out: we could possibly see Ripple settle with the SEC soon. Without this hanging overhead, XRP could continue its upward trajectory.
Or could it? After all, many other up-and-coming cryptos demonstrate greater levels of utility and seem like stronger opportunities. So, even free from regulatory scrutiny, XRP may not be as great of an opportunity at second glance.
Why Altcoins Like Ethereum and Cardano Are Better Buys
It may not be fair to compare XRP to other altcoins, such as Ethereum (CCC:ETH-USD) or Cardano (CCC:ADA-USD). This is because Ripple didn’t design the coin for widespread usage. Instead, it was designed to conduct faster and cheaper transfers between financial institutions.
Compare that to ETH, which can be used as a medium of exchange for a wider variety of blockchain and DeFi (decentralized finance) transactions. Or even Cardano, which is gearing up to become a viable alternative to Ethereum’s Ether native coin. Set against XRP, both seem like more solid contenders for becoming the main coins of the blockchain and DeFi economy.
Many crypto investors may be interested in going long here in the hopes that — with more widespread usage — demand for XRP will rise. However, given its niche applications and the fact its not even that popular on Ripple’s own platforms, it’s hard to make a case for XRP.
Granted, some third parties have been hard at work, trying to make XRP more DeFi compatible. Until it is, though, expect this crypto to be held back by its relatively limited utility.
Little Reason to Dive Into Ripple’s XRP Today
Over the past few months, XRP’s fortunes may have improved. True, Ripple may end up prevailing in the SEC lawsuit. If all goes right on that front, the news could support a further move in XRP above $1. However, even as the skies start to look clearer, you may not want to chase this name if it continues to rebound.
Between the risk that Ripple loses in court and the fact that ETH, ADA and other altcoins are far more attractive opportunities, there’s little reason to dive into XRP today.
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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.