XRP Prices Hang in the Balance
Ripple bears like to claim that XRP “serves no purpose” in its technology, but recent success with the “xRapid” software says otherwise. That—plus the continual “Is XRP a security?” debate—drove Ripple prices round and round in circles last week.
I see these two forces working in opposite directions.
Investors should be happy that xRapid is providing genuine benefits to businesses that dared to take a chance on XRP. But does it matter if the U.S. Securities & Exchange Commission (SEC) designates XRP a security?
For the uninitiated, Ripple has multiple offerings. One is “xCurrent,” a cross-border payments platform that has nothing to do with XRP. The other is xRapid, a similar program that relies on XRP to send money around the world.
For months, Ripple bears insisted that no company wanted anything to do with xRapid. Even reputable publications like Bloomberg took a side. Here’s a direct quote from one of their negative reports, issued in January 2018:
“One rationale for buying XRP is that unlike Bitcoin, the token has one narrowly defined but clearly useful purpose…The problem is that banks say they have no interest in using XRP.”
(Source: “Ripple Wants XRP to Be Bitcoin for Banks. If Only the Banks Wanted It,” Bloomberg, January 25, 2018.)
Within a month of this report, two major financial firms started XRP pilot programs. You would think a development of that magnitude would shut down previous criticisms, but I continued to receive emails saying my faith in XRP was ridiculous.
What will they say now, I wonder, that companies report that XRP lowers their transaction costs by 40%–70%?
The facts simply aren’t on their side, especially not since xRapid completed transfers at an average speed of two minutes. Better still, the majority of that time took place off the blockchain; the part involving XRP only took three seconds.
Will Ripple bears start believing? I doubt it. People rarely change their minds, even in the face of obvious truths. But I think it’s reassuring that we keep being proven right. It gives us a lot more reason to hold onto XRP when prices go through slumps, as they have been for much of 2018.
XRP a Security?
The SEC is planning a purge, that much we know.
Statements made by Chairman Jay Clayton and others have openly foreshadowed a crackdown on cryptos that stand in as securities. No one fully knows what the consequences will be, or if new rules will be created, but the fog of uncertainty is damaging in itself.
Besides, the management team over at Ripple is sending mixed signals. First, chief market strategist Cory Johnson issues a flat, no-nonsense position: “We’re 100 percent clear, it’s not a security. We don’t meet the standards.” (Source: “Ripple says its cryptocurrency XRP is not a security,” CNBC, April 12, 2018.)
But then a colleague walked back his comments slightly, saying that: “Whether or not XRP is a security is for the SEC to decide. We continue to believe XRP should not be classified as a security.” (Source: “Disgruntled XRP Investor Hits Ripple with Class-Action Lawsuit,” CCN, May 4, 2018.)
Which is it? I assume there are backchannel discussions between the SEC and the organizations it’s trying to regulate, meaning that a strong statement from either party could give us a peek into the direction of regulatory reform.
The first statement is unequivocal. It leaves no room for interpretation, whereas the second one leaves room for doubt.
In the end, we’re back at square one with regards to the SEC. There’s no way of knowing which way it’ll lean.
The success with xRapid is still something to cheer, though. It means that most of the criticisms leveled at Ripple (the company) were conducted by the ignorant or those in bad faith. I continue to believe that XRP prices can rise above $2.00 in the coming months, then head toward our long-term Ripple price prediction of $10.00.