It’s fairly clear that cryptocurrency is facing a reckoning of sorts recently. While the large-scale downward pull hasn’t spared XRP (CCC:XRP-USD), there’s a narrative emerging that favors it moving forward.
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XRP is the digital currency issued and partly managed by Ripple, the payment solutions company that also manages the RippleNet cross-border payment network. Unlike Bitcoin (CCC:BTC-USD), XRP coins are not mined.
Ripple minted the entire supply when the network was launched in 2012, and Ripple intermittently releases portions of the supply from an escrow and sells them on the open market. Out of the total 100 billion supply of XRP, over 46.2 billion coins are currently in circulation.
There are at least three reasons XRP should fare well after this most recent cryptocurrency downdraft subsides.
Winning in Court
If you’ve been following the Ripple vs. Securities Exchange Commission court battle and you’re like me, you really dislike the regulator right now. In fact, the SEC looks like a big baby in its efforts to charge Ripple with an unregistered securities offering.
The U.S. financial markets watchdog hauled Ripple to court last December accusing it of selling unregistered XRP securities and raising around $1.3 billion, making this the biggest crypto-related litigation, considering its market capitalization.
The judge presiding over the case has indicated that XRP looks and behaves more like a currency having utility rather than a security. That bodes well for Ripple — along with CEO Brad Garlinghouse and its executive chairman, Chris Larsen — in its crusade for vindication and deals a blow to the SEC in future efforts to regulate cryptocurrencies at large.
That the judge sided with Ripple is not what makes the SEC appear so contemptible right now, though. Rather, it’s the other central point to the case which is whether the SEC provided fair notice to Ripple that XRP would be considered a security.
Specifically the SEC is continuing to refuse to disclose information on the matter. The judge has ordered the SEC to turn over internal documents that could be used to strengthen Ripple’s claim that it never received fair notice that XRP would be considered a security.
In a move that should truly shock anyone who cares about financial regulation and abuse of authority, the SEC is simply refusing to cooperate. It may even face monetary sanctions.
The good news is that Ripple’s case is looking stronger and stronger and it also portends well for cryptocurrency at large in that the SEC is at least getting checked. However, and this is admittedly tangential, it has to make you wonder how much trust you should put in the institutions we’re all subject to.
Cross-Border Remittance Disruptor
Another reason XRP sits in strong position is simply that it has utility. XRP is used in cross-border remittances and settlements. The company’s RippleNet application allows users to move money quicker than traditional cross-border remittance and settlement services.
Ripple’s network has hundreds of institutional partners including Bank of America (NYSE:BAC), American Express (NYSE:AXP), and Santander (NYSE:SAN) among others.
Juxtapose Ripple’s business, established network and utility against those of Dogecoin (CCC:DOGE-USD) and the myriad other cryptocurrencies that fools are pumping money into now, and something becomes clear: XRP is actually on its way toward fulfilling some of the promise of decentralized finance.
Many other cryptocurrencies have no future, but XRP clearly does. And that’s what brings me to my next point.
In Position to Rebound
There are a few ways to look at the recent downturn in cryptocurrency. One would be the extremist view that Bitcoin is on its way to zero along with the broader crypto space. That’s an alarmist position I don’t think very many would agree with.
Somewhere toward the other end of the spectrum would be the idea that the market is simply digesting all of the crypto news and excessive enthusiasm of late. Thus, a rebound is imminent and companies in position to rise — i.e., those with real utility — will rise.
I’d say that is a very logical conclusion as DeFi becomes more and more entrenched. It would be hard to assume that XRP-USD will sink to $0 given that it derives fees from remittances. It is a legitimate company with a legitimate business and there will therefore be investors willing to pay for a chance at its earnings.
That’s why Ripple’s XRP is in a strong position as cryptocurrency evolves beyond its darker days.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.