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Ripple (XRP) cryptocurrency showed up as a major profit play for some investors in the last year. It has hit highs of $1.96 after trading at just about $0.21.
That may not sound like much. But if you bought 1,000 XRP at $0.21 for $210, it would have turned into $1,960 at its peak.
This is the magic of cryptocurrency investing today. You never know where you will find the next big pop.
XRP was the third top cryptocurrency by market cap before the company that created it, Ripple Labs Inc., was hit by a lawsuit from the U.S. Securities and Exchange Commission (SEC).
The price of XRP came under pressure after accusations by the SEC that Ripple Labs had violated investor protection laws by selling "unlicensed securities" (in other words, the XRP tokens). This took the XRP market cap down to the fifth-highest among cryptos.
Though the lawsuit hangs in the air for now, the coin still shows some life.
Today, we give you our Ripple price prediction for the next five years.
Ripple Price Prediction
At $1.70, the current XRP price hovers near the all-time high. Investors appear confident Ripple labs will win its battle with the SEC.
The price fell 18% on May 4 but has since recovered and passed resistance around the $1.50 mark. That's a good sign for this coin's technical momentum.
But the XRP price ahead will largely be determined by Ripple Labs' legal dispute with the SEC and crypto adoption as a whole.
Regulators are still grappling with an asset class that's completely new. Much of the battle involves simply checking to see if the written law applies to cryptocurrency, which seems to evade clear definition as new, innovative cryptos pop up.
Due to the volume of new cryptocurrencies and swift adoption of Bitcoin, Ethereum, and others, Ripple does stand a chance at survival.
If Ripple Labs wins in court, we can expect XRP to hit $4 in the next five years, easy. The company just needs to prove XRP was never a security...
What Is Ripple?
Every cryptocurrency is a little bit different. They're programmed with different protocols to serve different purposes.
For example, Bitcoin (BTC) is programmed mainly for scarcity. The developers made it so there would only ever be a finite amount; this is one element that drives its value.
Ethereum (ETH) gives people the ability to create smart contracts on a blockchain. This means the terms of a contract between two parties can go on an unchangeable, digital ledger. It can potentially avoid a mountain of paperwork to ensure proof of ownership or seal an agreement between two parties.
Ripple is another "altcoin" - or coin other than Bitcoin - that serves a purpose of its own. It's part of a larger network called "RippleNet," which provides a pathway for monetary value to travel between destinations, primarily large financial institutions like banks. It's similar to how the Internet uses a protocol to share information - RippleNet is like that, just dedicated to exchange of value.
Ripple is different from other cryptocurrencies in how it doesn't use a decentralized blockchain. It uses its own centralized network to validate transactions. That means the company hires a small group of people to validate transactions, instead of an army of miners around the world.
TODAY'S BEST CRYPTO BUYS
Three tiny digital coins are gearing up for a rally. One trading for around $12 could deliver a 638% profit by the end of 2021.
TODAY'S BEST CRYPTO BUYS
Three tiny digital coins are gearing up for a rally. One trading for around $12 could deliver a 638% profit by the end of 2021.
However, though Ripple is centralized, it is open source and supports the exchange of fiat, cryptocurrency, and commodities.
Centralization also provides a unique security advantage.
This all sounded like a good opportunity for Ripple investors, until the company came under fire by the SEC. But Ripple appears to be doing everything it can to rectify the situation...
Can Ripple Beat the SEC?
The SEC slapped Ripple with the lawsuit in December 2020. It also personally sued CEO Brad Garlinghouse and founder Chris Larsen for selling XRP as an "unlicensed security," apparently trying to make an example of it.
This has appeared to work somewhat, with partners like MoneyGram and Tetragon distancing themselves from Ripple. The coin is also no longer be available on Coinbase, Kraken, eToro, or OkCoin.
But this could also create a hole in the SEC case against Ripple...
Right now, many retail investors still hold XRP. The SEC's whole point, supposedly, is that they want to protect retail investors from Ripple taking their money.
The problem is, if these big exchanges continue to remove XRP from their lineups, it doesn't make retail investors' XRP disappear. It just means they won't be able to sell it anywhere.
So, a group of XRP investors filed a petition for the SEC to more clearly define their position on XRP as a security or not. It could affect whether these investors receive a payout or not if Ripple loses out.
The SEC Case Against Ripple
The SEC believes that Ripple is not a security but an investment contract. It uses the "Howey Test" to determine this. The Howey Test says that a security "requires investment of money in a common enterprise with the expectation of profit derived from the efforts of others."
Under this model, XRP doesn't pass, and neither do Bitcoin and Ethereum. And the SEC defends this by saying the Howey test is flexible to allow for future innovations and questionable investing schemes.
The argument for cryptocurrency's illegitimacy is that it's not based on the profitability of any company and can be easily manipulated by market sentiment.
Still, Ripple insists that XRP is a currency and the SEC's use of the Howey test is a stretch.
To demonstrate this, Ripple wants to show the XRP price is driven by factors bigger than market hype alone.
One way to do this is to show the stock is not completely driven by headlines. Ripple cites an example in 2019, when announcing its partnership with MoneyGram. MoneyGram stock more than doubled. Conversely, they want to show that XRP didn't budge.
Some charts will show a slight pop in the price. Then again, any asset could pop 10% to 15% on some good news.
At the end of the day, Ripple wants to do anything it can to set itself apart from the thousands of new "meme coins" out there, like DOGE.
If its own efforts fall short, maybe some outside factors can help...
The Digital Gold Rush of the 21st Century
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To learn about all three - and discover how even a small stake could transform into a small fortune in 2021 - click here.
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About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.