The XRP price correction is exacerbated by reports of a looming lawsuit against Ripple.
XRP price declined by 21% in two days on Coinbase from $0.5695 to $0.4491. The drop was accelerated by reports on Dec. 22 that the U.S. Securities and Exchange Commission (SEC)’s is preparing a lawsuit against Ripple.
Brad Garlinghouse, the CEO of Ripple, said the SEC “voted to attack crypto,” citing a Fortune article. He wrote:
“Today, the SEC voted to attack crypto. Chairman Jay Clayton – in his final act – is picking winners and trying to limit US innovation in the crypto industry to BTC and ETH. We know crypto and blockchain technologies aren’t going anywhere. Ripple has and will continue to use XRP because it is the best digital asset for payments – speed, cost, scalability and energy efficiency. It’s traded on 200+ exchanges globally and will continue to thrive.”
XRP price fell by roughly 13% following Garlinghouse’s tweet as some industry executives expressed concerns about the situation.
Meanwhile, cryptocurrency traders are mixed about where XRP is headed next. Some say that it might not have an immense impact on the price as Ripple faced regulatory hurdles before. Others believe XRP could continue to stagnate as a result.
Ripple’s situation is different from Block.one, says lawyer
One of the main discussion points of the reported lawsuit against Ripple by the SEC is the difference between Ripple and Block.one.
Block.one, the company behind the EOS ecosystem, settled with the SEC for $24 million before there was active litigation.
Since Ripple expects to deal with active litigation, the dealings between Block.one and the SEC are different from Ripple’s case. Jake Chervinsky, a general counsel at Compound Finance, said:
“No. The EOS action only dealt with the EOS ERC-20 token on Ethereum, not the EOS native token on the EOS blockchain. Block[dot]one settled without active litigation, & by then, the ERC-20 token was no longer trading. Here, SEC will allege an actively-traded token is a security.”
Chervinsky also raised the possibility of centralized exchanges temporarily delisting XRP while the case is pending. Since there is no historical precedence for this type of regulatory conflict, this remains uncertain. He wrote:
“We’ll have plenty of time to talk about the merits of the SEC’s Ripple enforcement action after the complaint comes out. Right now, the big question is if centralized exchanges delist XRP while the case is pending. I bet a lot of lawyers are setting emergency calls right now.”
Immediately after the news broke, the social media volume for the keyword “XRP” surged, according to analysts at Santiment.
What happens to the XRP price now?
XRP price rallied strongly throughout November, breaking a multi-year downtrend, as the Bitcoin price (BTC) surpassed $18,000. At the time, XRP saw an impulse rally on Coinbase, seeing a brief fear of missing out (FOMO) uptrend in the U.S. market.
Trader and Cointelegraph Markets analyst, Michael van de Poppe, emphasized that after a massive impulse wave, a heavy retracement is likely. He explained:
“XRP looking for further correction as it tests the $0.45 range for the third time, while consistently making lower highs. Very natural to see less volatility & a correction after such an impulse wave.”
Some traders, however, say that after this pullback, XRP may consolidate and that the lawsuit could turn out to be a “nothing-burger.”
Meanwhile, other traders argue that the heavy-hitting approach of regulators could amplify the negative market sentiment around XRP and push the price down further. As the chart above shows, the sentiment around XRP hit fresh lows as news of the SEC lawsuit was revealed.