XRP Meets Cliff Edge as Centralized Security Claims Gain Momentum
The artist formerly known as Ripple fell off a cliff edge on Wednesday, as the value of XRP plunged 12.4% in the space of just ten minutes.
The drop came amid a general market decline, however, more worrying for the XRP army, it coincided with a revival of claims that the coin represents a security offering. Amendments were recently made to an ongoing SEC filing in a California court, possibly strengthening the argument that the coin is a security. Ripple Inc must now file a response to the claims by September.
XRP Price Plunge
The coin price fell off a cliff edge on Wednesday, losing 12.4% in just over ten minutes. That saw the valuation drop from $0.292286 down to $0.256028. That leaves XRP down 18.8% for the past seven days, and 37% for the month.
Barring a brief surge in late June, the coin price had remained somewhat stable throughout most of 2019 – remaining perched around the $0.32 range. Much like Stellar (XLM) and Waves (WAVES), XRP outperformed the broader market in late 2018, including Bitcoin. The general feeling is that these coins had their pumps already, and hit a lengthy cooldown period moving into 2019. All of the coins mentioned above are in the red for the year to date so far.
Security Argument Rages On
The filing to the SEC makes for interesting reading, and attempts to frame the coin’s status as a security within the framework of the SEC’s own official guidance. The document maintains that the value proposition of XRP depends largely on the efforts of parent company, Ripple Inc – essentially triggering the conditions of the Howey Test.
“Ripple’s value proposition as a company depends upon the promotion of XRP, yet XRP is entirely or essentially pre-functional and purchased by investors in anticipation of profit based on the efforts of Ripple.”
The document also references instances where Ripple made efforts to promote the investment promise of XRP based on actions they themselves would take; such as working to get the coin listed on exchanges, or engaging in “distribution strategies that we expect will result in a stable or strengthening XRP exchange rate against other currencies”.
A story is also relayed concerning rumours of an XRP listing on Coinbase in late 2017, early 2018. The plaintiffs claim Ripple Inc was the source of these unfounded rumours, which resulted in a price pump for the coin.
The latest amendment adds an alleged violation of California’s advertising laws. This relates to Ripple’s alleged dishonesty about the origin of XRP, the coin’s possible ownership by Ripple Inc, as well as its supply and adoption statistics.
The security issue rages on, having begun years ago. To give the defendants their fair due, Ripple Inc CEO Brad Garlinghouse vehemently opposes claims that the coin is a security, and laid out three reasons why it isn’t. Check out: Three Reasons XRP is Not a Security: Ripple’s Garlinghouse
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Chart via CoinMarketCap.