Unsettled Lawsuits Make Ripple A Binary Risk-Reward Proposition

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It might feel like cryptocurrency is as hot as its ever been, and there’s some truth to that. But as mainstream as Bitcoin (CCC:BTC-USD) or Ethereum (CCC:ETH-USD) have gotten, there’s still a vast proportion of the population that just doesn’t get this whole blockchain thing. But in the near future they will, and that means a big opportunity for altcoins including Ripple (CCC:XRP-USD) that have room to grow substantially.

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The outlook for XRP-USD is currently murky. Ripple has litigation to deal with, in particular a contentious SEC lawsuit. If the outcome is binary then the risk of failure is 50%. That sounds more like gambling than investing.

I’m personally uninterested in gambling, so spoiler alert, I would pass on XRP-USD. That being said, many experts see a settlement as the most likely outcome, which means this could be an opportunity for investors with higher risk tolerances.

There is no doubt that cryptocurrencies are here to stay. Dismissing that now would mean ignoring the truth in front of your eyes. The biggest value for these e-coins now is in the services they provide.

Because of their ubiquity, fintech companies are blazing new trails. This new tech will move our assets cheaper, faster and wider.

XRP Is Not A Currency

What would benefit Ripple and other altcoins is if we drop the term “currency” from the name. They are still too wild to actually serve that purpose. I view them as a store of wealth, just like any other valuable asset. This concept is not new because we already deal with gold. Its prices fluctuate too much to use as a currency, yet we accept the idea that it has and holds value.

We don’t price things in gold and we don’t use it for payment. If we want to make a purchase at a store with gold the process is cumbersome. We’d have to find a dealer during business hours, then go back to the store to finish the transaction. An online purchase is even longer because we’d have to deposit the cash first.

Conversely, I can do the same transaction in my crypto account while standing at the register. That is the real benefit of having crypto now. Ripple was one of the pioneers who has now hit a snag. Any relief on that front may earn its way back to relisting on cryptoexchanges.

The high price of BTC-USD scares people out of the conversation. They need time to digest. Eventually the world will accept crypto. Bitcoin has led the way so far but there are plenty of other strong contenders. Ethereum is now number two, but Ripple has had success before and it can do so again.

Ripple Earned Its Fame Years Ago

Ripple (XRP) Chart Showing Potential Base

Source: Charts by TradingView

In 2017 XRP-USD spiked 1400% and its market cap reached over $130 billion. Currently it is worth about a third of that but regaining footing. The opportunity going forward depends on verdicts in courtrooms. Therefore, it’s important to admit that there are no absolute experts here.

I’ve had good luck using charts to time entries in BTC-USD and ETH-USD. XRP-USD stock is on the mend trying to establish higher-lows to deal with resistance above. Cryptocurrencies had a mini crash this week and that dive took Ripple with it.

The price range is tightening something fierce, so a big move is coming. The bulls will likely defend the 75 cent level with vigor. If successful, then the breakout will accelerate above $1.1.

The Risk From Potential Bitcoin Drag

There could be outside risk from Bitcoin. If BTC-USD falls below $30,000, it will take all cryptos down with it. That would be a buying opportunity because the bulls will buy the dip. They’ve proved time and again that they are relentless.

Companies like Ripple are blazing trails and most will reward their investors. We can be stubborn and fight evolution all the way, or be smart and embrace it early. I bet even the haters wished they believed in Bitcoin under $100. I am not saying that XRP will have the same outcome, but there’s definitely an opportunity worth exploring.

The reason for my aversion is my need for simplicity. It’s hard enough to trade something as foreign as cryptocurrency; I don’t want to complicate it with litigation issues. As far as finding the perfect entry, XRP investors should use the method that worked for gold. Accumulate enough of it over time and in small increments. If we space out entries into an appreciating asset over time, we’re bound to do well in the long run.

On the date of publication, Nicolas Chahine 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.

Nicolas Chahine is the managing director of SellSpreads.com.

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