In the past 24 hours, XRP has dropped around 4%. The possible reasons for the short-term weakness arise from the SEC’s potential appeal against Ripple.
Ripple had a positive year-to-date return but XRP’s scheduled release of 1 billion tokens is also having a slight downward pressure on its price. How soon will the token recover?
XRP market is mute due to 2 reasons
In the last 24 hours, XRP has lost 4% of its value. While its performance has fallen short this year, gaining about 20% in returns, the court’s July ruling was a positive. In its lawsuit with the SEC, Ripple was asked to pay $125 million in penalties instead of $2 billion, adding to its monthly gains. However, XRP started on a muted note on Tuesday.
There are two possible reasons for XRP’s dip. First, Ripple unlocked 1 billion XRP tokens on October 1. While the release from escrow is a regularly scheduled practice, any increase in circulating supply puts downward pressure on the token price. This happens if demand falls short against the increased supply, and the price has to be corrected. Second, there have been increased discussions around a potential SEC appeal in the courts. After the July ruling with Ripple, the securities regulator had until October 7 to appeal the verdict. The previous ruling was considered a victory for Ripple with lawyers predicting an appeal as the SEC has been focusing on enforcement actions against crypto players.
XRP could experience short-term correction
Marc Powers, a blockchain professor and former SEC enforcement attorney, told Fox Business that the SEC will likely appeal. He said, “I would think it would not want to have the programmatic trading analysis stand.” Ripple’s XRP sales on public exchanges have been classified differently from direct sales to institutional investors. The court found that all sales did not violate the securities laws and the SEC would want to challenge the ruling because it may create conflicting interpretations among district judges and the Second Circuit. The Second Circuit Court oversees major financial centers like New York and it has to maintain consistent legal standards across regions. Journalist Eleanor Terrett previously stated that the SEC’s general consensus is against the court decision.
Meanwhile, the Relative Strength Index (RSI) of XRP remains neutral in the 60 range and could inch towards 70. This suggests that the weakness might be temporary and can subside after the SEC appeal date. Once the additional unlocked supply is absorbed by the market, the XRP price could regain strength. Looking at the Bollinger Bands, volatility has been in range and if XRP can hold above the $0.60 levels, price levels could inch back towards $0.70. This means XRP price could recover in October if the macro factors remain favorable.
