The XRP (XRP -0.44%) cryptocurrency, commonly known as Ripple, scored an important legal win in mid-July. The digital-currency's price chart soared from $0.47 to $0.84 in a matter of hours.
However, investor excitement has faded since then. Ripple trades at just $0.52 per token today. The trading volume has also faded dramatically in recent weeks.
Is Ripple's fading chart a sign of long-term weakness or is it a good idea to pick up a few tokens on the cheap?
Ripple's recent backstory
July's positive price correction was the result of a legal ruling in the lawsuit brought by the Securities and Exchange Commission (SEC) in December 2020. U.S. District Court Judge Analisa Torres mulled over the evidence for months before issuing a final ruling, which was deemed a partial victory for Ripple Labs -- the organization that manages the Ripple blockchain network and the XRP token.
Crucially, the verdict was Ripple-friendly enough that American crypto exchanges enabled buying and selling the token again. The SEC argued that Ripple should be treated as a security rather than a currency, which would place it under the agency's purview and make Ripple trades subject to the same requirements and limitations as stocks or bonds.
But Judge Torres disagreed with two of the SEC's three complaints. She allowed one motion to move forward to a full trial. In essence, Judge Torres ruled that Ripple should be treated as a security only in the hands of institutional investors and not when "less sophisticated" investors are involved.
Why Ripple's big jump didn't last
So the crypto briefly soared, then settled into a downhill slope. Many investors hoped for -- even expected -- a more clear-cut outcome.
Furthermore, the ruling made it clear that this was not the end of the legal process. All three rulings are open for appeals, and it would not be surprising to see the wheels of the courtroom machinery grind all the way up to the Supreme Court over the next few years.
Indeed, the SEC has already filed for an appeal on the grounds that the case is extremely important for the crypto investing sector and therefore deserves the deepest possible legal review. The agency says that the case hasn't been concluded in its current state. This filing accelerated the XRP token's price drop.
What lies ahead for Ripple and XRP
The SEC lawsuit lingers on, and I don't think it's going away completely any time soon. The final, irrefutable, end-of-appeals outcome of this case should influence the government's long-term framework for crypto policies.
Judge Torres' review appears to support separating the crypto sector into two camps -- security-like coins that should build value like a stock and currency-like coins used as tools of the trade. So far, Ripple falls in the second group, powering a digital-payment network.
XRP's price chart should stay mellow until the matter is completely settled, one way or another.
On the upside, American crypto exchanges are once again comfortable with allowing people to trade this token without raising a legal firestorm. That improvement alone should allow the token to track closer to Ripple's actual business prospects over time.
On that note, the payment network seems poised to become a giant of international money transfers. The network has boosted its access to the South Korean market and launched a dollar-based stablecoin to serve as an official currency in the Republic of Palau. Those projects are less than six weeks old, announced after the SEC verdict.
Why Ripple's low price could be your cue to jump in
I don't know if you noticed, but XRP is actually one of the largest players in the crypto market. With a $27.4 billion market cap, it has the fifth-largest market footprint today. Excluding fixed-value stablecoins, Ripple ranks as No. 3, behind only Bitcoin and Ethereum.
I'm not talking about some forgettable little altcoin here, but a current sector giant with strong management and potentially game-changing business plans. Don't forget that the SEC case is likely to affect how people, investors, companies, and governments all around the world will handle crypto assets in the long run. In other words, Ripple's future will affect the markets for Ethereum and Bitcoin, too.
I can't promise that the end of the yellow brick appeals road will lead to a magical dreamland of hands-off regulation and free-flowing Ripple commerce, but the token seems poised to gain value in the long run, no matter what. Even a draconian turn of events further down the street would leave Ripple Labs open for business in more than 190 countries not named the U.S.
So I think it's a good idea to grab a few XRP tokens while they're cheap. After all the ups and downs in recent memory, Ripple is priced just below its three-year average.
