- Ripple’s native token XRP is facing serious risks of plunging as a string of negative fundamentals attacks buying sentiment.
- A Puerto Rico-based firm has filed a lawsuit against Ripple and its CEO, alleging security frauds. Meanwhile, disgruntled co-founder Jed McCaleb is reportedly dumping 400,000 XRP units every month.
- The XRP/USD exchange rate is holding its yearly gains for now.
XRP, the native cryptocurrency of the fourth-largest blockchain project, Ripple, is facing a difficult task as it ventures further into an economically-battered 2020.
The challenge is to attract new buyers and keep hold onto the existing ones against the risks of capital outflow. XRP is standing in the middle of three very pessimistic market events, all adding massive selling pressure on its market.
The Bearish Trio
It begins with a little-known Puerto Rico firm, dubbed as Bitcoin Manipulation Abatement, LLC, that has sued Ripple and its chief executive Brad Garlinghouse over the unlawful sale of XRP worth $1.1 billion. The lawsuit comes atop another class action from XRP investors, claiming damages over Ripple’s failure to register XRP as security with the U.S. regulator.
Adding its 120-degree to the XRP’s ‘Troubling Pie’ is Jed McCaleb, the disgruntled founder of Ripple Labs, the San Francisco-based firm behind the creation of the Ripple blockchain.
McCaleb, who now runs a competing blockchain project, Stellar, dumped over 54 million XRP tokens (~$11.8 million) in April 2020, according to on-chain analysis. The study also noted that McCaleb sells about 400,000 XRP tokens every month. He has been on it since 2014.
The last and the third problem is Ripple Labs itself. The firm paid $16.6 million worth of XRP to its partner MoneyGram to use its RippleNet solution. MoneyGram does not hold those tokens but sell them right away as a measure to protect them from its price volatility.
Ripple Labs has more partners like MoneyGram, and each one of them receives the Ripple tokens to use its payment solutions.
That XRP Downside Risk
The institutional sell-offs in the XRP market has already scared small investors away, according to the firm’s very-own first-quarter financial report. The filing noted that Ripple experienced an 87 percent drop in XRP sales. It sold $1.75 million worth of XRP in Q1/2020, which is way down than its Q4/2019’s deals worth $13.08 million.
The reduced sale record in Q1/2020 and its emotional impact on Q2/2020 failed to impact Ripple’s spot market. Barring the Coronavirus-induced sell-off on March 12 that practically affected every global asset, the XRP/USD pair managed to post gains on a year-to-date timeframe.
Data on Messari showed that Ripple was trading 12.08 percent higher YTD-wise. Nevertheless, its gains were lesser than the ones its rivals logged. Bitcoin, for instance, was up 22 percent while Chainlink etched 105 percent returns for its investors.
Fundamentally, Ripple could suffer from a lack of interest among buyers heading into Q2. Meanwhile, a drop in the bitcoin price could bring some short-term relief to the token.