In the hectic week which began on the 8th of March 2023, the world saw the collapse of the 2nd and 3rd largest US banking failures in the U.S. - Silicon Valley Bank (SVB) and Signature bank (SB). Indeed the news had rippled through global markets, especially concerning the crypto industry where the banks had great interest and a major concentration of clients. According to CoinShare, digital asset investment products had seen the largest single weekly outflow of $255m, led by Bitcoin’s $243.5m. While Ripple was certainly not free of exposure, seeing over a 5% price shock when SVB announced the second wave of mass withdrawals, the asset had defied market conditions and received net inflows of $0.3m. Ripple’s Garlinghouse also reassured on the 13th of March in a tweet that there would be no disruptions as most cash was with a broader network of banks. Furthermore, investors were reassured by the government’s announcement that all SVB and SB depositors would be made whole. Following this news, crypto bulls immediately retook the reins, driving broader market gains led by BTC spiking 25% in the past 5 days. Yet, XRP has again been an exception, remaining bearish as the market continues to recover. Why?

About: In December 2020, the US Securities and Exchange Commission initiated its lawsuit against Ripple on the basis that XRP was sold to investors without being registered as a security. The company has claimed that XRP is not a security, but rather, used in its business to facilitate cross-border transactions for clients.

The case continues to contribute to the continued depression of XRP, with investors uncertain as case updates have gone quiet. Investors await summary judgment, which has been speculated to arrive “in the coming days or weeks” according to Pro-XRP lawyer John Deaton. Attorney Jeremy Hogan had suggested in a tweet last week that presiding judge Torres may have already come to a verdict on whether XRP is a security.

The recent silence and uncertainty follow the significant 57-page ruling of the Daubert motions, where both parties sought to exclude expert testimony from summary judgment. The TLDR (Too long; didn’t read) was summarised by Ripple general council Stuart Alderoty. While neither side was a clear winner from the ruling, Alderoty suggests that the outcome is in their favour as the SEC’s top expert witness, who was tasked with analysing XRP buyer expectations, was struck from the record. On the contrary, Ripple’s experts on the differences between Ripple’s contracts and those in the Howey case (a monumental case that set precedent for investment contract qualifications) were allowed to remain.

While Ripple and its community of supporters are optimistic for a win, there is still clear uncertainty reflected by the depressed asset price. A loss for Ripple would likely have industry-wide implications, acting as a precedent to allow the SEC to crack down on all reaches of the industry.

While we are optimistic about a ruling in Ripple’s favour, if Ripple were to lose, the probable consequence of a major sell-off is also taken into account. Regardless of the decision, Ripple’s potential as a borderless, trustless, instant, and cheap payment and currency exchange settlement system is convincing. The company has already partnered with hundreds of financial institutions globally which use and are integrated into RippleNet. For this reason, we see value in Ripple moving forward and are bullish in the long term.

Indicators point toward a bullish reversal

XRP currently trades at $0.365 to the USD following a month-long decline in a descending channel. Monthly lows were formed on the 12th of march when the price touched but failed to break through the lower trend line of the channel. Over the past 2 weeks, the volume has grown quite exponentially and resulted in a diverging OBV. Such can be interpreted as the loading of a spring before its release, creating bullish momentum for a rapid breakout into a bull market. A similar sign of bullish reversal is seen in the RSI, which continues to lose downward momentum, remaining flat for the past month despite the continual decline in price. A bullish reversal would likely require support from optimistic SEC v Ripple news as well as continued positivity in the broader market. On the upside, the immediate key barrier for XRP is the upper trend line of the current declining structure. A break through to the up side would confirm the current bullish flag pattern.

All things considered, we are bullish on XRP, and see the current depressed price as a buying opportunity. In the mid-term, the price of XRP will largely be impacted by the outcome and news related to the SEC suit. However, in the long term, we see great potential.

Market Rippling News!

Mar 17 2023