Depending on your view, a devastating blow has been dealt to crypto, or a much-needed purge is in progress due to the SEC suing Ripple and two of its top executives for selling XRP tokens which the regulator claims were unregistered securities.
XRP dropped dove over 30% on the news, but the carnage might only be just warming up. The negative sentiment has spilled into other altcoins, as investors wonder which asset is targeted next. Here’s why this situation is likely contained to just Ripple and altcoin holders have little to fear, but also why the news might have been enough to turn the overall trend in crypto bearish.
Ripple Lawsuit: Attack On Crypto, Or Cleansing Of Centralization?
Back in the earliest days of the crypto market when Bitcoin itself was just a toddler learning to walk before it went on its first bull run, Ripple Labs was building a blockchain-based protocol of their own.
XRP tokens were eventually minted, and over the years have been sold and distributed to individuals, investors, and institutions. But the lion’s share of the token supply remains locked in escrow that Ripple themselves are responsible for.
Losing resistance turned support will trigger a plunge to just pennies per token | XRPUSD on TradingView.com
The firm’s founders themselves, just like Satoshi did, set aside plenty of coins for themselves. And when XRP rocketed to over $3 per token in 2018, CEO Brad Garlinghouse and Executive Chairman Chris Larsen became some of the richest men in the world.
Related Reading | Ripple Effect: What The XRP SEC Lawsuit Says To New Crypto Projects
For whatever reason, all these years later the US Securities and Exchange Commission has filed a lawsuit against Ripple and sued its two top executives.
XRP Catastrophe Shifts Market Sentiment, Prompts Altcoin Apocalypse Part Two
XRP, the native token to the Ripple protocol, tanked as a result. The selloff could only get worse as a domino effect of exchanges delisting the altcoin has begun.
It has also created a ripple effect across the industry, where investors are reconsidering their altcoin holdings and derisking into Bitcoin or cash (not to be confused with Bitcoin Cash).
XRP is the worst performer, but negative sentiment has also spilled into other altcoins | Coin360.com
Altcoins across the board are a sea of red. Wallet data suggests that XRP whales are absorbing the selling, but to what end? The damage is likely done to XRP, not because of the lawsuit, but because it shows how government agencies can so easily go after an arguably centralized cryptocurrency.
Because the argument for Bitcoin and Ethereum is stronger as a decentralized asset, there’s little the SEC or any organization can do to shut things down.
What the US government, however, might have also achieved by doing this, is putting a damper on the recently unstoppable Bitcoin trend. There are two scenarios that could play out related to the sudden regulatory shift.
One, more altcoin capital can come pouring out of coins like XRP and into Bitcoin, causing dominance to fly further and the bull trend to keep trucking along. Or two, negative altcoin sentiment could cause another tipping point as it did in 2019, pulling Bitcoin back into a bear phase with it.
How the end of the year and early next year play out, are especially critical for altcoins, and even the future of Bitcoin.
Featured image from Deposit Photos, Charts from TradingView.com