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XRP slides to $0.50 as ETHgate controversy resurfaces, Ripple CTO debates impact on litigation

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FXStreet in Market News 12 386841
April 29, 2024 18:05

content provided with permission by FXStreet

  • XRP lost all gains since April 22 and corrected to $0.50, early on Monday, ahead of SEC filing of opposition brief. 
  • XRP community debated the ETHgate controversy, how the alleged Ethereum free pass negatively affected the altcoin. 
  • Ripple CTO David Schwartz slammed ETH co-founder Charles Hoskinson for separating ETHgate argument from SEC litigation on Ripple. 

Ripple (XRP) loses all gains from the past seven days, trading at $0.50 early on Monday. XRP holders have their eyes peeled for the Securities and Exchange Commission (SEC) filing of opposition brief to Ripple’s motion to strike expert testimony. 

In March, the regulator had offered new expert testimony in its opening brief, asking for an injunction (a court order restricting an entity from certain actions) from selling XRP to institutional investors. 

The ETHgate controversy, a conspiracy theory that Ethereum received a free pass from US regulators has resurfaced. Ripple’s Chief Technology Officer (CTO) David Schwartz debated its impact on the litigation against the payment remittance firm. 

Daily Digest Market Movers: SEC to file its response to Ripple’s opposition brief on April 29

  • The SEC vs. Ripple lawsuit has emerged as one of the key catalysts influencing XRPLedger’s native token XRP’s price. 
  • XRP holders are therefore awaiting key litigation from the SEC, on April 29. 
  • The regulator offered new expert testimony when supporting its arguments for punitive damages (a payment that a guilty defendant needs to pay on top of compensatory damages) and an injunction, in March. 
  • The SEC asked the court for an injunction to prohibit the payment remittance firm from selling XRP to institutional investors. 
  • The ETHgate conspiracy theory that implies the SEC allegedly gave Ethereum a free pass while taking legal action against Ripple, has resurfaced on social media platforms. 
  • An XRP community member and proponent, X handle @XRPcryptowolf, called out Ethereum and Cardano co-founder Charles Hoskinson and said XRP holders were correct all along. The XRP army member referred to Hoskinson’s take on the ETHgate conspiracy. 
  • Hoskinson referred to the controversy as “never ending and devoid of reason,” the Ethereum co-founder admitted that many members of the XRP community believe that ETH community members bribed the SEC to “take out” XRP. 
  • Ripple CTO David Schwartz asked Hoskinson whether William Hinman(former SEC director of the Division of Corporation Finance from 2017 to 2020) was not involved and whether he had a financial interest in Ethereum. 
  • Hoskinson tried to limit the ETHgate debate to a conspiracy theory while Schwartz alleged that former SEC executive William Hinman’s interest in his law firm influenced factors that affected the litigation against Ripple. 
  • William Hinman, retired as partner at the firm of Simpson Thacher & Bartlett, prior to his term at the SEC. 

Technical analysis: XRP at $0.50, sidelined traders could re-enter

Ripple is exchanging hands at $0.50, early on Monday. The altcoin has erased recent gains from the past seven days. There were two confirmed (confirmed by RSI drop to oversold zone) high momentum breakouts on April 12 and April 13, as seen in the XRP/USDT 1-day chart. This offered sidelined traders the opportunity to enter, with the first entry at $0.50, second at $0.4786 (close of April 13) and the third at $0.4188 (low of April 13 candlestick). 

For traders who missed this setup previously, the opportunity presents itself again, with XRP back at $0.50. A bullish trend reversal is likely as the altcoin dipped into the oversold zone on the Connors RSI indicator, on two instances, mapped out in the chart. 

Connors RSI (CRSI) is a composite of the Relative Strength Index (RSI), UpDown Length, and Rate-of-Change. The momentum oscillator ranges from 0 to 100, and is used to identify overbought and oversold conditions of an asset. An oversold condition is typically considered a “buy signal” when combined with high momentum breakouts in price. 

The bullish target is 22.5% gains from $0.50, the upper boundary of the trend-following indicator, the Donchian Channel at $0.62. The channel is useful to identify breakouts on either side to trigger an entry.

XRP

XRP/USDT 1-day chart

A daily candlestick close below the April 20 low of $0.49 (acted as support for the past nine days) could invalidate the bullish thesis for XRP price. The April 20 low of $0.49, April 14 low of $0.46 could act as support levels for XRP.

SEC vs Ripple lawsuit FAQs

It depends on the transaction, according to a court ruling released on July 14: For institutional investors or over-the-counter sales, XRP is a security. For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.

The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token. While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.

The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at. Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say. Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.

The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation. While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.

The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.