In mid-July, crypto investors everywhere were rewarded with a huge legal win in the form of a positive court ruling for XRP (XRP +1.92%). This beleaguered cryptocurrency had been embroiled in a massive legal case with the U.S. Securities and Exchange Commission (SEC) for more than two years. In the end, a U.S. judge ruled that XRP was not a security, as long as it wasn't being sold directly to sophisticated institutional buyers.
Immediately, the price of XRP exploded. The crypto token is now up more than 75% over the past week.
This XRP court ruling is fantastic news for two other cryptocurrencies facing potential SEC action: Solana (SOL +0.25%) and Cardano (ADA 1.25%). Both of them have already rallied in the wake of the SEC ruling, and I think there's much more to come.
Cardano
First up is Cardano, which the SEC called an unregistered security when it filed lawsuits against cryptocurrency exchanges Binance and Coinbase Global in early June. When this happened, investors panicked, and Cardano's price plummeted nearly 20%.
It's easy to see why Cardano rallied immediately in the aftermath of the XRP court decision. If the court ruled that XRP was not a security, it's difficult to imagine an adverse ruling in the case of Cardano, which is first and foremost an open-source blockchain platform.
Image source: Getty Images.
The big picture here is that Cardano is attempting to become a faster, more secure, more scalable, and less energy-intensive version of Ethereum. Anything Ethereum can offer, Cardano can, as well, and that includes everything from non-fungible tokens (NFTs) to decentralized apps. The missing piece for Cardano had always been smart contracts, but high-profile blockchain upgrades in 2021 and 2022 solved that issue.
The most important growth catalyst for Cardano going forward is decentralized finance (DeFi), which relies heavily on smart contracts. As long as there was an SEC regulatory overhang, there might have been investor concerns about "locking up" crypto funds in Cardano's DeFi protocols.
After all, in a worst-case scenario, you might not be able to "unlock" them later. But the risk of that happening has diminished significantly, and key DeFi metrics should continue to improve for Cardano.
Solana
Solana had been under regulatory scrutiny even before it was also named as a security in the SEC lawsuits against Binance and Coinbase. In part, that was because former FTX CEO Sam Bankman-Fried was an early investor in Solana, and there were inevitably questions to be asked after FTX went belly up last year.
For that reason alone, I was concerned about Solana from a regulatory perspective since it already seemed to be in the crosshairs of regulators. In a worst-case scenario, the SEC might decide to make an example of Solana and its deep-pocketed venture capital investors.
CRYPTO: SOL
Key Data Points
So maybe, just maybe, Solana investors can breathe a sigh of relief now. The XRP court ruling could help to unlock the growth of the Solana ecosystem, which had stalled out recently due to all the uncertainty hanging over this crypto.
I'm particularly optimistic about Solana's ability to regain its momentum in the NFT market. Some popular NFT collections had already decided to migrate to other blockchains in the wake of the FTX meltdown, and the new SEC regulatory scrutiny didn't help matters.
Moreover, Solana offers something no other top blockchain can offer: a mobile crypto strategy. First announced last summer, this mobile crypto strategy is based on the release of new hardware products designed to complement the underlying Solana blockchain platform.
The first product release was the Saga, an Android-powered phone optimized for crypto. This admittedly expensive phone (sold at a price point of $1,000) started public sales in early May. The idea is simple yet genius: Mobile is the key to onboarding more users to blockchain and crypto technology.
How big of a rally can we expect?
From my perspective, there are two primary outcomes to consider: a worst-case scenario and a best-case scenario. In the worst case, the XRP court ruling turns out to be a mirage, the SEC decides to go after Cardano and Solana anyway, and there's full-blown carnage in the crypto market.
In a best-case scenario, though, the XRP court ruling provides needed regulatory clarity and unlocks a new era of growth for Cardano and Solana. Cardano is allowed to continue its rapid growth in the DeFi space, while Solana can accelerate its mobile crypto strategy.
Freed from regulatory distractions, both blockchain ecosystems can grow, and both crypto tokens start to approach their all-time highs from late 2021. If that's, indeed, the case, then I'm bullish on the prospects of both Solana and Cardano.
