Ripple (CCC:XRP-USD) continues to live and die by its court case. In the latest round of developments, a federal judge has ruled that the owners of digital tokens associated with Ripple Labs can offer their “meaningful perspective” in the U.S. Securities and Exchange Commission (SEC) case against them.
The latest piece of news led to Ripple gaining ground once again. Since proceedings started at the end of last year, Ripple has scored several notable victories.
At this point, a major catalyst for Ripple will be a potential settlement of the case. That makes it a precarious investment in my eyes. Although things are progressing smoothly, we cannot say whether Ripple will make a strong comeback.
Last year, the SEC accused Ripple Lab executives of manipulating the XRP price. The SEC sued Ripple CEO Brad Garlinghouse and co-founder and former CEO Chris Larsen, accusing them of raising more than $1.3 billion through an unregistered securities offering.
Since then, the fortunes of Ripple have moved in concert with the developments in the case. That makes Ripple a very risky digital coin in my eyes. Even though things seem to be going in their favor, the case is not over. If it goes the other way, the coin will crater. Hence, only the most risk-tolerant investors should invest in this one.
What Inherent Value Does Ripple Bring to the Table?
Ripple functions as an electronic form of money. And it provides the infrastructure for banks to transfer funds more quickly. It operates differently than most cryptocurrencies because Ripple holders can use it on any bank rather than just one specific type of network. So if you have accounts with multiple providers, it is just the right digital coin for you.
One of the most intriguing things about Ripple is how it can exist in three separate but related forms. The first form is its network, which facilitates digital payments. Secondly, you’ve got XRP — a cryptocurrency built on top of one specific version (or “ledger”) within that same payment system called the XRP Ledger. Finally, Ripple Labs itself is responsible for developing and maintaining the Ripple payment protocol and exchange network.
Many people are frustrated with the current state of cross-border payments. Costs can be high, waiting periods lengthy, and there’s always that chance you’ll end up paying more than you should have been charged. With Ripple, everyone can send money around without any hassle whatsoever. It is completely secure because all data travels through a distributed network rather than being handled by one central point as other methods do. With 1,500 transactions per second and an approval time averaging 3 to 5 seconds, Ripple has never been more efficient for processing payments.
Plenty of Reasons to Invest in the Digital Coin
Small business owners might find themselves more willing to adopt Ripple if it becomes widely used. The company has always provided capital for all sizes, which would help boost economic growth through increased access and speediness with financial transactions/flows.
In addition, Ripple has perhaps one of the most reputable backings from banks in all of cryptocurrency. It has partnerships with American Express (NYSE:AXP) and Santander (NYSE:SAN), among several others.
Finally, the Central Bank Digital Currency is a form of currency used in place of traditional fiat currencies. Ripple creates this new kind of money. It will soon go into pilot testing on the XRP ledger network starting this year with several banks participating and private entities like financial institutions who want their transactions verified faster than ever before.
Remain Mindful of the Risks
For those who want a more traditional cryptocurrency, Ripple is not the answer. Unlike Bitcoin (CCC:BTC-USD), which was mined and then exchanged between users anonymously for economic reasons, XRP was specifically designed to solve issues within banking systems while also being able to revolutionize them thanks to its strong ties with a variety of banks around the globe through their network effects.
The Ripple payment protocol is in direct competition with SWIFT, but it has a lot of work ahead. The banking sector prefers to use International Payments System. The reasons are pretty simple. It is the largest network and is well established. However, there are some drawbacks, including slow speeds for transactions (especially international ones) as well as higher risk when transferring funds between banks through this system. In the long run, this is where Ripple can really make a dent.
However, the risk of a lost SEC case is hanging over Ripple like a grey cloud. The SEC can make an example out of them to send a message to the wider crypto world. Cyrptocurrencies operate outside of regulatory scrutiny at the moment. But that can change quickly. If you want to invest with a long term horizon in mind, Ethereum (CCC:ETH-USD) is your best bet.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence.