Since the U.S. presidential election in November, XRP has experienced significant growth, rising by approximately 374% as of March 22. This surge reflects investor optimism that the administration would introduce favorable regulations for cryptocurrencies, possibly positioning the U.S. as a hub for crypto innovation. Among various cryptocurrencies, XRP stands out as a top performer during this period.
One primary factor contributing to XRP’s success since the election is its previous underperformance due to a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against Ripple, the company behind XRP, and its executives, Brad Garlinghouse and Chris Larsen. The SEC’s 2020 lawsuit accused them of selling XRP as an unregistered security. The case garnered wide attention because if XRP had been classified as such, it would grant the SEC significant regulatory control over XRP and potentially similar cryptocurrencies.
Cryptocurrency advocates generally prefer regulation under the Commodity Futures Trading Commission, avoiding the stringent regulations of securities laws. As a result of the lawsuit, investors turned cautious towards XRP, given the high-profile nature of the case involving Ripple and its executives.
In 2023, a federal judge determined that while XRP had been an unregistered security when sold to institutional investors, it was not considered as such when sold to retail investors through exchanges. This judgment was seen as a triumph for Ripple and its executives. While the SEC initially appealed parts of the decision, the change in presidential administration signaled a shift towards pro-crypto policies, making it unlikely for the appeal to prevail. SEC Chair Gary Gensler stepped down with the new administration, and Garlinghouse later announced that the SEC had dropped its appeal, which had seemed increasingly probable.
The lawsuit’s resolution eliminated a significant uncertainty for XRP and opened the door for a potential spot XRP exchange-traded fund (ETF). Prior to the lawsuit’s conclusion, several asset managers had already proposed the launch of spot XRP ETFs, contingent on the case’s resolution. Additionally, post-appeal, Garlinghouse mentioned in a Bloomberg Television interview that Ripple might consider an initial public offering (IPO) in the future, although it was not prioritized for early 2025.
With the legal overhang lifted, Ripple could potentially broaden its customer base and enhance the utility of XRP. The firm collaborates with financial institutions to facilitate more efficient cross-border payments. There is an anticipation that the current regulatory environment will make it more straightforward for banks to engage with cryptocurrencies, potentially attracting more banks to partner with Ripple. Furthermore, Ripple has introduced a dollar-pegged stablecoin, RLUSD, which will operate on the XRP blockchain network, potentially increasing XRP’s role as a “bridge asset.”
Despite the positive developments, market analysts advise a cautious approach to investing in XRP. Given the inherent volatility and difficulty in valuing cryptocurrencies, it is recommended that investors consider maintaining smaller, speculative positions in XRP and remain mindful of the evolving dynamics of the relatively nascent cryptocurrency sector.
