Regulatory Risks Loom as Investors Consider an SEC Appeal

The Saturday Overview

On Saturday, XRP gained 0.24%. Following a 0.02% rise on Friday, XRP ended the day at $0.6229.

SEC v Ripple Uncertainty and Regulatory Risk Remain Headwinds

On Saturday, there were no SEC v Ripple case-related updates to the investor appetite for XRP. However, uncertainty toward the outcome of the SEC v Ripple case and increasing regulatory scrutiny remained headwinds.

The expectations of the SEC appealing the court ruling on Programmatic Sales continued to leave XRP short of $0.70. The SEC v Ripple case entered its final stage in November. According to the November 13, 2023 court order, the SEC and Ripple must complete remedies-related discovery by February 12, 2024.

The SEC and Ripple are working toward a settlement relating to XRP sales to institutional investors. A settlement or a Judge Analisa Torres ruling on a final disgorgement could influence investor appetite for XRP. The SEC is eying a penalty nearer to $770 million in XRP sales to institutional investors.

However, case law favors a significantly lower number. Legal experts have speculated the amount could be below Ripple’s $150 million legal bill. In bringing down the number, Ripple could cite Morrison v NAB. The Supreme Court ruled the SEC only has jurisdiction over US-based sales. In other words, the SEC must deduct XRP sales to institutional investors outside the US.

Programmatic Sales of XRP Ruling: An SEC Appeal on the Horizon?

A lower penalty could increase market expectations of the SEC appealing the Programmatic Sales ruling. The SEC sued Kraken for acting as a broker, dealer, exchange, and clearing agency for crypto asset securities. Kraken also faces charges for commingling customer fiat and crypto assets with its own.

In the court filing, the SEC listed 16 cryptos as securities. XRP was notably absent from the list because of the Programmatic Sales ruling.

An SEC win against Kraken and Coinbase (COIN) could incentivize the SEC to appeal the Programmatic Sales ruling. The matter of classifying cryptos as securities is a significant one for the SEC and the crypto market. A successful appeal could give the SEC more powers to regulate the US digital asset space by enforcement.

However, if Judge Katherine Failla grants the Coinbase motion to dismiss (MTD), the court could throw out the Kraken case. Significantly, a Coinbase win could force US lawmakers to expedite the rollout of a US regulatory framework and quash fears over the SEC appealing the Programmatic Sales ruling.

XRP Price Action

Daily Chart

XRP remained above the 50-day and 200-day EMAs, affirming bullish price signals.

An XRP break above the $0.6354 resistance level would support a move toward $0.65.

Regulatory activity and SEC v Ripple-related news remain the focal points over the near term.

However, a fall through the trend line and 50-day EMA would give the bears a run at the $0.5835 support level. Buying pressure could intensify at $0.5960. The 50-day EMA is confluent with the trend line.

The 14-day RSI reading of 51.69 indicates an XRP break above the $0.6354 resistance level before entering oversold territory.

4-Hourly Chart

On the 4-hourly, XRP held above the 50-day and 200-day EMAs, reaffirming bullish price signals.

An XRP break above the $0.6354 resistance level would support a return to the $0.65 handle.

However, an XRP drop below the 50-day EMA would bring the 200-day EMA and the trend line into play.

The 4-hourly RSI, with a reading of 54.55, indicates an XRP break above the $0.6354 resistance level before entering overbought territory.