Investing in Ripple in 2021: a promising investment or a gamble?

The end of 2020 was a rather unfavorable period for Ripple cryptocurrency. Its popularity and value were shaken noticeably due to litigation with the SEC: the price of the XRP token dropped to $0.2 in December. The situation began to level off in the first half of 2021. The asset rose to $0.29 in May (it had even hit $1.8 the month before). XRP is now trading at about $0.264. If the company continues to hold its ground in the SEC proceedings, the cryptocurrency’s price could jump significantly – up to $2-3.

We will talk about the reasons and the merits of the SEC’s lawsuits against Ripple, and whether it makes sense to invest in this cryptocurrency anytime soon.

Development History

The Ripple project started in 2004. Its founder Ryan Fugger initially intended to create a payment system RipplePay and released its first version in 2005. Soon Chris Larsen, who later became its director, joined the project. A year later, the management rebranded it with a new name, Ripple Labs.

In 2011, the company changed its direction and began to develop as a fast payment service: Larsen saw it as a potential competitor to the SWIFT system. At that time, the concept was very promising – the market lacked new entrants. The first stage of formation subsequently brought the company considerable popularity, which fully manifested itself in 2017.

The main feature of Ripple cryptocurrency was its role as an exchange medium. At the time, it was a truly innovative idea. It allowed people in different countries to freely send transfers to each other outside of banking structures, converting some currencies into other currencies.

Ripple issued 100 million XRP tokens, of which 55 million were placed in the company’s escrow accounts and the rest went to market.

The crypto-asset was most expensive in late 2017 and early 2018, with the price climbing to $2.78. At the time, Ripple was a real competitor to Bitcoin and Ethereum in terms of capitalization, being among the top 3 cryptocurrencies along with them, which made it quite popular among investors.

Reasons for proceedings with the SEC

Ripple’s reputation noticeably shook after the first claims from the SEC – the US Securities and Exchange Commission. The claim from the regulator was that the company had been raising funds from investors for 7 years without official registration. According to the SEC, XRP tokens are securities and not cryptocurrency because they cannot be used for transfers within the banking system. Many people find this argument illogical, but the story is not over and further developments are difficult to predict.

Ripple does not acknowledge the accusations and says that XRP is just a means of payment and not a security. And there is a lot of logic in Ripple’s position: the tokens are used to convert currencies and act as intermediaries in the exchange process. These assets do not allow the management of a company and do not give the right to profit, their value is determined only by market factors – the demand for them as a means of payment.

Interestingly, the Ripple cryptocurrency is quite popular with major banks, mostly Japanese banks. It is favored, for example, by Mitsubishi UFJ Financial Group (total assets – more than $2.5 trillion), as well as world-famous HSBC Holdings PLC, Credit Agricole, and Bank of America. Moreover, the company constantly expands its presence in the international financial market: recently it became the owner of 40 percent of shares of Asian firm Tranglo. This shows that Ripple does not plan to curtail its activity and is intensively looking for new opportunities for further development.

However, the SEC’s lawsuit shook the defendant’s position, and many market participants were quick to write off the XRP token. For example, 21Shares removed it from its list of accepted assets, Grayscale Investments sold its XRP tokens and removed them from its Digital Large Cap Fund trust. Notable crypto exchanges such as eToro, Coinbase, Binance US, B2C2, Bitstamp, and OKCoin were not left out, each of which suspended trading in the coin.

In April 2021, Ripple petitioned the court for access to SEC filings disclosing the regulator’s treatment of Bitcoin and Ethereum. It was granted. This increases the company’s chances of eventually fighting off the commission’s claims.


In addition, Ripple did not stop at one petition and soon filed the next one. In it, it asks the court to order the SEC to open an investigation into several cryptocurrency exchanges: Upbit Singapore, Bitfinex, Bithumb, Bitlish, Bitforex, BitMart, AscendEX, Bitstamp, Coinbene, HitBTC, Bitrue Singapore, Huobi Global, Korbit, OKEx, and ZB Network Technology. The company’s management is trying to prove that the XRP token was traded on foreign, not American, trading floors, which is why it cannot be regulated by the U.S. regulator.

What is Ripple’s future?

XRP’s future will depend on several factors: how the company develops its business in Asian markets, the outcome of the case with the SEC, and whether Ripple will have many competitors from new or existing payment systems.

XRP cryptocurrency was created as a network for instant international transfers, which could become an alternative to the well-known cross-border payment system SWIFT. At the first stage of its development (2011), it had no real competitors, but over time the situation has changed. As you know, in December 2020, SWIFT launched the GPI instant transaction service, which allows you to transfer money around the world 24/7. Accordingly, Ripple is no longer the most innovative international payment system.

Moreover, more than 10 large financial organizations from different countries of the world cooperate with SWIFT, it has a well-deserved reputation among many participants of the international banking system. Because of this, it will be very difficult for Ripple to compete with such a large and well-known competitor.

Another factor in the technical development was Ripple’s recent initiative to create sidechains based on the XRP Ledger network. David Schwartz, the company’s CTO, announced on his Twitter account.

The innovation will allow smart contracts to be run on the network while maintaining its previous function as an efficient payment system. The main idea behind the innovation is that sidechains will operate as separate blockchains, but use XRP as the underlying asset. And if before Ripple was perceived only as a bridge between large organizations and banks, allowing fast and efficient transactions, now the company makes an attempt (which is likely to be successful) to address the world of cryptocurrencies, due to which it gains additional points of popularity with users.

The potential is high, but concerns remain

Over the past few years, competition in the cryptocurrency market has grown significantly. Many blockchains with their tokens have appeared, allowing fast transfer of funds with minimal fees. Investors have been exposed to a wide range of investment opportunities, and new projects have to fight for their attention and actively compete with each other.


On the other hand, this segment is still capable of generating surprises. For example, one tweet can significantly change the value of a popular coin. Considering the high volatility of the market, Ripple’s victory in the SEC litigation will allow the company to make a loud statement, which will lead to the rapid growth of XRP.

Ripple’s top executive Brad Garlinghouse said in April 2021 that the company would only issue an IPO if it was successful in its lawsuit against the regulator. The price of the XRP token rose to $1.54 after the announcement. Thus, the company plans to continue to grow despite pressure from the SEC.

XRP may also be affected by the demand for it as a means of instant bank transfers. So far, this niche remains relatively vacant. Some services (e.g. Chainlink) act as a link between the banking system and cryptocurrencies, but they cannot work with fiat directly. Therefore, Ripple has all the chances to regain its former popularity here.

The uncertain situation with cryptocurrencies of national banks (CDBCs) is also an additional opportunity for the company to get up to speed. Regulators are trying to take control of the digital payments sphere and thus lead the trend toward digitalization by disarming independent coins. In the long term, CDBCs will also allow instant international payments in any currency, making them a truly powerful competitor to Ripple. But while countries have yet to switch to CDBCs, the company has time to develop its ecosystem and strengthen its position.

So, the ratio of XRP’s current price to its potential high makes Ripple cryptocurrency a very promising investment. However, the litigation situation and other factors introduce some uncertainty. That’s why many investors today consider it wise not to invest more than 5% of their portfolio in this token.


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