Ripple (XRP): Buy The SEC Uncertainty, Sell The Settlement News

Research in my first article attempts to show there’s not enough real world adoption to justify a long-term position in Ripple’s XRP token (XRP-USD). But there is a great opportunity to buy during the headwinds from the SEC lawsuit and sell on news of a settlement or legal victory.

In this update we’ll look at further chart declines, recent news regarding the token, and additional evidence that the XRP price remains unaffected by the increasing ODL volume or the multitude of partnerships.

Market update and price action

When I wrote the May update article, the XRP price had experienced a moderate drop from $.77 to $.61. Since then the entire crypto industry has experienced turmoil around specific coins and institutions leading to cascading liquidations, huge waves of selling, and the destruction of almost a trillion dollars from the global cryptocurrency market cap. I chronicle that great implosion here.

No coin — including XRP — was exempt from this massive shedding of value.

Since flirting with the $.30 level at the height of the market craziness, the price has recovered — along with most other coins. For the quarter, the token dropped about 60%. But I suppose if you liked it at $.61, you’ll love it at $.37.

Is the bottom now in for XRP? This is the crypto market and anything can happen but it stands to reason the worst is over. During the entire industry selloff event in June, nothing fundamentally changed with XRP. It simply followed Bitcoin’s (BTC-USD) lead. This is the default pattern for XRP until some news event regains the attention of retail investors.

XRP and related industry news

From Ripple’s Q2 2022 XRP Markets Report:

Q2 2022 was a record quarter for On-Demand Liquidity as volume grew considerably with over 9x YoY growth. Customers continued to expand the use of ODL for use cases beyond traditional remittances or individual payments, with treasury flows and bulk payments accounting for more volume on the network.

The Q1 2022 Report revealed RippleNet had a $15B annualized payment volume run rate for the year. No update on this number was given in the 2Q report. $15B per year sounds impressive until you look at the competition. While numbers vary wildly, SWIFT conducts about $1.7 trillion worth of volume a day. A DAY. Although RippleNet has always seen itself as a competitor to SWIFT, it is still a vanishingly small player.

Also from the 2Q Report, Ripple is still aggressively pursuing many new opportunities in the crypto ecosystem. They recently unveiled partnerships with the major brands Lotus Automotive and Balmain to roll out NFTs on the XRP Ledger. Ripple also revealed a partnership with FLUF World to develop the Root network which will be integrated with XRPL and will use XRP for gas fees.

In BIS news, work continues on Project Dunbar to enable international settlements using multi-CBDCs, a platform for international payments that would directly compete with Ripple. Project Dunbar would:

replace the old, slow and expensive correspondent banking model of international transactions that is reliant upon financial institutions holding foreign currencies and often requires single payments to pass through multiple institutions before it is settled. Under Project Dunbar, there would be no need to rely on intermediaries holding foreign currency reserves, thereby decreasing the cost and time required for cross-border transactions.

Stablecoins are still on the rise for international transfers and remittances. USD Coin (USDC-USD) is already integrated with the global Visa network for transaction settlements. According to McKinsey & Co., USDC and Tether (USDT-USD) completed $3 trillion of transactions during the first half of 2021. The adoption of crypto in emerging markets presents a real opportunity for international money transfers through stablecoins settlement to become a common occurrence.

From the 2Q Report, Ripple is still aggressively pursuing many new opportunities in the crypto ecosystem. They recently unveiled partnerships with the major brands Lotus Automotive and Balmain to roll out NFTs on the XRP Ledger. Ripple also revealed a partnership with FLUF World to develop the Root network which will be integrated with XRPL and will use XRP for gas fees.

Ripple also partnered with FOMO Pay, a Singapore-based payment solution provider. FOMO Pay will use ODL to facilitate cross-border payments.

At long last Ripple co-founder Jed McCaleb has finally emptied his XRP wallet labeled “Tacostand.” Ripple’s CEO Brad Garlinghouse officially confirmed the end of McCaleb’s dumping spree after the co-founder finally sold the last of his 9 billion XRP tokens.

Update on my long-term thesis

Kudos to Ripple for all their recently announced partnerships, they certainly aren’t allowing the SEC lawsuit to hold back marketplace efforts. But is this making a difference in the value of the XRP token? Should I revise my opinion that XRP isn’t worth holding long term?

First from a macro perspective, the SWIFT network isn’t going anywhere. In reviewing the volumes, RippleNet’s $15B a year run rate isn’t threatening SWIFT’s huge trillion dollar a day market share. Not even a little bit.

Growing the ODL volume by 9x year over year did nothing for the price of the coin. Last year at this time XRP was $.73 but now is currently half that amount. At these levels, the ODL numbers are insignificant to the coin’s price.

Also troublesome to long term XRP bulls are the organic growth of stablecoins as settlement instruments and the multi-CBDC Project Dunbar endorsed by the 63 central banks of the BIS. In my estimation these are actually more viable competitors to the existing SWIFT system than XRP.

So I remain open to learning more, but am currently resolved to sell XRP on news of a settlement or legal victory. That is, if I can (see next section).

Update on Vauld

In my May update, I noted recently finding another exchange called Vauld that not only lists XRP but also paid up to 6.7% interest on deposited coins.

I took my own advice and moved my XRP to Vauld. Wow, did that one blow up in my face!

On July 4, Vauld suspended all withdrawals, trading, and deposits and as with Celsius, hired Legal and Finance advisors to look at restructuring the company. Vauld has disclosed assets worth ~$330 million and liabilities worth ~$400 million at this time.

Vauld has signed a term sheet with Nexo for a 60-day exclusive period. This allows an:

exploratory period related to its intended acquisition of Vauld, pending a satisfactory outcome of the initiated due diligence process. Upon successful completion of the transaction, Nexo plans to acquire up to 100% of Vauld and reorganize its future operations with the aim to accelerate its deeper presence in Asia.

The good news is that Vauld’s $70M gap is theoretically easier to cover compared to the gigantic $1.2B hole in Celsius Networks’ balance sheet. But the bad news is my XRP is quite unavailable for trading right now.

Conclusion

Ripple’s 2Q 2022 report shows a great deal of activity in the NFT and Web3 space as well as new and interesting partnerships. Unfortunately, I don’t see this changing the long term prospects for the token.

So when can we expect the lawsuit to end? Although a settlement could happen at any time, the court battle may likely extend into next year. “It now looks like a resolution will come in 2023,” Ripple general counsel Stuart Alderoty said in a tweet.