Cryptos big and small continue to head lower and Ripple (CCC:XRP-USD) is no exception.
Before, it was holding up relatively well in the aftermath of May’s meltdown. Mainly, thanks to the belief that its developer, Ripple Labs, would win in its courtroom showdown with the Securities and Exchange Commission (SEC).
But, since then, a few things have changed.
First, market participants are growing more skittish about digital assets. China’s continued crackdown on crypto underscores the risk that governments around the world (including the U.S.) will limit its ability to become a viable alternative to traditional finance.
In addition, speculators may be throwing in the towel, as they realize the fast profits seen just a few months back aren’t coming back for quite some time.
Second, with the extension of the Ripple/SEC court case, into the fall, a possible payoff from this, XRP’s main catalyst, has been delayed.
The extension may not decrease Ripple’s chances of victory, but it does minimize the urgency of locking down a position, ahead of the court’s decision.
Yet, while these changes are putting downward pressure on the price of XRP, an opportunity may be opening up.
Perhaps not right now, as it trades for around 58 cents. But, if its price falls further (based on factors other than the court case), this may become a worthwhile binary bet on Ripple’s victory against the SEC.
There’s Only One Real Play With XRP
This crypto may be the sixth most-valuable by market capitalization, but don’t mistake its high valuation for high utility.
As I discussed last month, it doesn’t hold a candle to other leading altcoins, such as Ethereum (CCC:ETH-USD) and Cardano (CCC:ADA-USD).
ETH remains the predominant coin in the world of DeFi (decentralized finance). Cardano is one of many leading “Ethereum killers” that could grab much of its current market share.
But, XRP? It’s not optimized for DeFi. In fact, it was designed by Ripple for a limited purpose: as a means to finance transactions on its international funds remittance network.
Given its limited usability outside of this network, it’s hard to build a bull case around it based on its utility. The only real play with XRP? The likelihood that it surges, depending on the outcome of the SEC’s case against Ripple.
A Ripple victory may not be as much of a long-term game-changer as it appears at first glance. But, given that speculators will trade on the headlines, instead of the details, this development could produce a parabolic move higher, akin to the wild moves it’s made in the past.
XRP Is a Bet at Best
First off, you must admit to yourself (if you’re looking to buy XRP), that you’re making a wager, rather than an investment. In other words, going long this token isn’t a long-term play on its expanding usage.
Instead, it’s a binary bet on the outcome of SEC v. Ripple Labs.
As with any binary wager (either you win, or you lose), it’s all about the odds being in your favor. At today’s prices, that may not be the case.
XRP may be down a lot from its 52-week highs (around $1.96). But, it’s still up big from its lows (under 20 cents). Speculators still have some hope Ripple prevails against the securities industry watchdog.
Yet, as retail punters active crypto continue to get fearful, the price of this token (along with other popular cryptos) will likely continue to drift lower. And, if the investing public gets fearful, XRP could fall to a price where it’s worthwhile to get greedy.
How so? If it falls in value, due to the delay in the court decision, and overall pessimism for digital assets, rather than on any change in Ripple’s true odds of legal victory.
Then, if positive news breaks? Similar to how this token performed after the Judge’s bombshells early in the case shifted things back in Ripple’s favor, we could see a reversal in sentiment, and a triple-digit percentage price move higher for XRP.
Bottom Line: Hold Off for Now
At the present time, it’s not worth it to buy XRP-USD. There’s only one real play with it (a bet on Ripple beating the SEC’s case). And, at today’s prices, the possible payoff if it wins fails to outweigh the risk it collapses if the regulatory agency’s claims its a security, not a cryptocurrency, hold up.
If prices fall, despite Ripple’s odds of victory holding up, it could be worth it to roll the dice with XRP. Until then? Hold off buying it, but keep it on the back burner as a high-risk, high-possible return play.
On the date of publication, Thomas Niel held a long position in Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.