The cryptocurrency sector as a whole has been under pressure in recent months. At the same time, many signs point to digital coins becoming well-respected financial and programming tools. The cryptocurrency winter isn't likely to last much longer in my eyes, which means it's high time to pick up some high-quality coins and tokens while the fire sale lasts.
In particular, I see a bright future for the cross-border payment system Ripple and its XRP (XRP -4.95%) token.
XRP trades at a massive artificial discount
XRP prices have fallen 41% since the recent peak in mid-November, outpacing value-store powerhouse Bitcoin and decentralized programming token Ethereum by a wide margin.
Of course, XRP and the Ripple ecosystem are facing legal challenges that its larger cousins don't have to worry about. At the same time, Ripple enthusiasts will tell you that the outcome of the cryptocurrency's precedent-setting legal showdown will affect every digital coin in the end. Therefore, investors in every corner of the cryptocurrency market should pay attention to what's going on in the case of the Securities and Exchange Commission (SEC) versus Ripple.
That's the big, scary, risky cloud that's been hanging over XRP since December 2020. It's enough to drive a nervous man distracted, and certainly enough to keep cryptocurrency investors on XRP's sideline.
The SEC case hinges on the idea that XRP is a security, much like a stock or a bond, and that Ripple executives broke trading rules when they started selling XRP tokens without registering them with the SEC first. In a perfect world, a value store coin such as Bitcoin might fall under this sort of treatment while utility tokens like XRP and Ethereum would be managed more like fiat currencies.
This split between different cryptocurrency types is essentially on trial here, because the final verdict (after appeals, as necessary) will help American courts and lawmakers set up a long-term legal framework for the digital market. XRP falls somewhere in the gray area between the two extremes, offering a currency-like payment system that can also store value when it's not in transit.
However, the SEC case seems likely to end soon, and most likely in Ripple's favor. If and when that happens, XRP's token prices should spike sharply higher. Popular cryptocurrency exchanges such as Kraken, Binance, and Coinbase Global closed down XRP trades last year in order to avoid the potential for legal issues. The minute these exchanges restart their XRP trades, investors will release more than a year's worth of frustration and pent-up demand. That's on top of the general cryptocurrency market rebound, which should gain traction in 2022.
Image source: Getty Images.
What's the good news?
First, Ripple CEO Brad Garlinghouse is aiming for a 2022 conclusion to the SEC drama, and that's his worst-case scenario. Garlinghouse says U.S. Magistrate Judge Sarah Netburn is asking good questions, showing that she understands the complex nature of the cryptocurrency market and that all digital assets should not be treated the same way. In other words, Ripple's CEO expects a reasonably positive outcome, and fairly soon.
In late December, cryptocurrency lawyer Jeremy Hogan tweeted that the SEC vs. Ripple case should end by April. Hogan saw no good reason why the case should be "strung out" over the summer. And Hogan has faith in the legal system, even if its processes run slowly. Here's what he said:
I have been involved in a thousand lawsuits in various U.S. Courts and various areas of law. The Court system is frustrating and lengthy. But what I know is that-IT USUALLY GETS IT RIGHT. Don't give in to cynicism. It will get it right, again.
Meanwhile, the Ripple payments system is finding new real-world use cases around the world. The largest bank in Morocco joined the RippleNet blockchain network on Wednesday, for example. Spanish mega-bank Banco Santander joined the network in the summer of 2020 and has developed its own international payment services based on RippleNet and XRP. You'll also find American household names such as Bank of America and American Express on RippleNet's customer list, though their involvement is on the back burner until the SEC case has run its course.
My point is, XRP has utility value even if Americans aren't allowed to use it -- and even more in a world where domestic banks can use RippleNet to power frictionless international payments. Take that turbo-powered value engine and add it to a widely expected marketwide rebound in 2022, and you get a recipe for exceptional XRP returns.
That's why I expect XRP to beat Bitcoin, Ethereum, and pretty much any cryptocurrency you'd care to name this year. Clarity is coming and that's good news.
