The cryptocurrency market is soaring in 2024. Ethereum (ETH -1.00%) has gained nearly 30% year to date, easily outpacing a 10% increase in the S&P 500 stock market index. Bitcoin (BTC -1.49%) and Solana (SOL -1.62%) are up roughly 45% over the same period.
But Ripple (XRP -0.69%) didn't get that memo. The international payment system's XRP token is down by almost 20% instead:
I think that's a big mistake. Whether you're a seasoned crypto investor or looking to pick up your first digital currency, XRP looks like a fantastic buy right now. If you have $1,000 to invest in a crypto name today, you should consider grabbing approximately 2,000 XRP tokens.
Here's why.
Legal challenges and market perception
If you've heard of Ripple at all, it's probably because of the legal challenge it's facing.
The U.S. Securities and Exchange Commission (SEC) launched a lawsuit against Ripple Labs and some of its top executives in December 2020. The suit argued that the XRP launch raised $1.3 billion of cash investments by creating a new security, which wasn't registered with the SEC as you would a new stock, bond, or convertible debt papers.
Ripple doesn't want to settle the case, aiming to set a legal precedent for the crypto industry as a whole. In CEO Brad Garlinghouse's mind, XRP was never a security and should never have required an SEC registration. The XRP token and underlying Ripple payment network do not imply ownership of Ripple or of any other entity, and the token doesn't pass the crucial "Howey test."
Howey is a legal principle established in a 1946 Supreme Court case. It checks whether a transaction is an "investment contract" and, therefore, should be regulated as a security. It involves four criteria: investment of money in a common enterprise with the expectation of profits solely from the efforts of others.
It's a high-stakes challenge. The SEC has requested damages of nearly $2 billion. In return, Ripple believes a $10 million penalty would be appropriate for the missing paperwork around offering XRP to institutional investors. Judge Analisa Torres has dismissed most of the SEC's complaints, but the institutional investor claims moved on to a jury trial that should conclude in 2024.
The ups and downs of this game-changing courtroom drama often send XRP's token prices up or down. In fact, the legal din has effectively drowned out the market-moving effects of Ripple's actual business operations.
Ripple's resilience and future potential
Let's imagine the SEC winning what remains of its registration complaints. A $2 billion bundle of damages and interest payments would hurt Ripple, but it shouldn't be the end of the story.
XRP's market capitalization stands at $27.7 billion today. The RippleNet payment service partners with local banks in more than 100 countries worldwide, with each bank connection adding a modest cache of transaction management funds. Last month, Ripple announced a dollar-based stablecoin with 100% cash backing, providing a financial prodge between XRP and Ethereum (ETH -1.00%). That's another sign of substantial cash assets in Ripple's pockets, bank accounts, and couch cushions.
And there's more buzz in Ripple's bonnet. A popular crypto exchange started trading XRP options in March, boosting the Ripple network's financial flexibility and credibility. RippleNet is making new partner connections in places like Japan and South Korea.
Long story short, Ripple and XRP are making significant progress, and the network for quick and low-fee international payments is more useful than ever. Removing $2 billion from its corporate ledgers may slow Ripple down a bit, but the beat goes on.
That's the worst-case scenario here, too. I'm no lawyer, but the signals I've seen out of that New York courtroom probably won't lead Judge Torres and the jury to that extreme conclusion.
It's time to take action
So, if XRP tokens are cheap due to the SEC's legal pressure, I'm more than happy to buy the cryptocurrency while it's discounted.
The current price represents a fantastic buying opportunity for a token not only deeply integrated into a global payment network but also poised to benefit from a potential legal victory. Once the dust settles, Ripple's robust partnerships, innovative solutions, and expanding market presence should drive significant value for XRP holders. Yes, even if the SEC gets everything it wants from the securities registration complaint.
Investing $1,000 in XRP today could yield impressive returns as the legal drama subsides and Ripple continues to revolutionize the financial industry.
