XRP Bears Eye a Pullback to Sub-$0.70 on Appeal Talk

Bob Mason
Updated: Jul 14, 2023, 01:50 UTC

On Thursday, Judge Torres ruled that programmatic sales of XRP do not satisfy the third prong of the Howey Test. An SEC appeal could be on the horizon.

XRP - Technical Analysis - FX Empire.

In this article:

Key Insights:

  • On Thursday, XRP surged 73.35% to end the day at $0.8163.
  • A Ripple victory in the SEC v Ripple case delivered XRP and altcoins a breakout session.
  • The nearer-term technical indicators turned bullish, bringing $1.00 into view.

On Thursday, XRP surged 73.35%. Following a 1.01% loss on Wednesday, XRP ended the day at $0.8163. Significantly, XRP revisited the $0.93 handle for the first time since December 2021.

XRP Price Action

At the time of writing, XRP was down 0.55% to $0.8118. A choppy start to the day saw XRP rise to an early high of $0.8255 before falling to a low of $0.8075.

XRP Weekly Chart sent bullish signals.
XRPUSD 140723 Weekly Chart

Daily Chart

The Daily Chart showed XRP/USD sitting below the $0.8400 – $0.8535 resistance band. However, XRP sat well above the 50-day ($0.5072) and 200-day ($0.4649) EMAs, sending bullish near and longer-term price signals.

Notably, the 50-day EMA pulled away from the 200-day EMA and reflected bullish momentum over the near term.

Despite falling back from a Thursday high of $0.9337, XRP/USD avoided the upper level of the $0.8000 – $0.7875 support band, supporting a run at $1.00.

However, a fall through the upper level of the $0.8000 – $0.7875 support band could see XRP return to sub-$0.70.

Looking at the 14-Daily RSI, the 87.43 reading signaled XRP sitting in overbought territory, aligned with the 50-day EMA, and supporting a run at $1.00.

XRP/USD daily chart indicators are bullish.
XRPUSD 140723 Daily Chart

4-Hourly Chart

Looking at the 4-Hourly Chart, the XRP/USD faces strong resistance at the $0.8000 psychological level. XRP/USD sits below the upper level of the $0.8000 – $0.7875 support band, bringing $0.7875 into play.

However, XRP sits above the 50-day ($0.5159) and 200-day ($0.4918) EMAs, sending bullish signals over the near and longer-term time horizons. Significantly, the 50-day EMA pulled away from the 200-day EMA, supporting a move through the upper level of the $0.8000 – $0.7875 support band to retarget the $0.8400 – $0.8535 resistance band.

The 14-4H RSI reading of 89.99 indicates XRP sitting in overbought territory and aligns with the 50-day EMA, with buying pressure outweighing selling pressure. Significantly, the RSI signals near-term bullish momentum, supporting a breakout from the $0.8400 – $0.8535 resistance band to target $1.00.

4-Hourly Chart is XRP bullish
XRPUSD 140723 4 Hourly Chart

Judge Torres Delivers Heavily Anticipated Ruling

It was a monumental Thursday session, with Judge Torres and the SEC v Ripple case grabbing the news headlines.

On Thursday, Judge Torres issued the rulings on the motions for Summary Judgment. Torres ruled that XRP isn’t always a security, a blow for Gary Gensler and the SEC’s regulation by enforcement campaign.

An area of interest within the ruling related to programmatic sales. Judge Torres noted that Ripple sold XRP on digital asset exchanges programmatically or through trading algos (the “Programmatic Sales”). Judge Torres added that the sales on digital asset exchanges were blind bid/ask transactions. Ripple did not know who was buying the XRP, and the purchasers did not know who was selling it.

Considering Programmatic Sales, Judge Torres ruled that,

“Having considered the economic reality of the Programmatic Sales, the Court concludes that the undisputed record does not establish the third Howey prong. Whereas the Institutional Buyers reasonably expected that Ripple would use the capital it received from its sales to improve the XRP ecosystem and thereby increase the price of XRP, Programmatic Buyers could not reasonably expect the same.”

Judge Torres went on to say,

“Indeed, Ripple’s Programmatic Sales were blind/bid ask transactions, and Programmatic Buyers could not have known if their payments of money went to Ripple or any other seller of XRP. Since 2017, Ripple’s Programmatic Sales represented less than 1% of the global XRP trading volume. Therefore, the vast majority of individuals who purchased XRP from digital asset exchanges did not invest their money in Ripple at all.”

Judge Torres added,

“Here, the record establishes that with respect to Programmatic Sales, Ripple did not make any promises or offers because Ripple did not know who was buying the XRP, and the purchasers did not know who was selling it. In fact, many Programmatic Buyers were entirely unaware of Ripple’s existence.”

Ripple CEO Brad Garlinghouse had this to say about the Summary Judgment,

“We said in Dec 2020 that we were on the right side of the law, and will be on the right side of history. Thankful to everyone who helped us get to today’s decision – one that is for all crypto innovation in the US. More to come.”

Unsurprisingly, the SEC issued a statement that ignored significant elements of the Court ruling. However, SEC Chair Gary Gensler was active on Twitter but abstained from commenting. The SEC statement noted the Court’s recognition in using the Howey Test and that Ripple sold XRP tokens as investment contracts, violating the securities laws in certain circumstances. The SEC said it would continue to review the decision.

Ripple Chief Legal Office Stuart Alderoty responded to the news, saying,

“A huge win today – as a matter of law – XRP is not a security. Also, as a matter of law – sales on exchanges are not securities. Sales by executives are not securities. Other XRP distributions – to developers, to charities, to employees are not securities.”

The Court ruling is good news for crypto exchanges, with the Court ruling that Programmatic Sales of XRP do not establish the third Howey prong. However, Ripple remains on the hook vis-à-vis institutional sales.

There is a risk of an SEC appeal that could drag the case out for another two to three years.

The Day Ahead

We expect the SEC v Ripple case rulings to resonate throughout the day as experts slice and dice the Judge Torres ruling. However, investors should also monitor SEC and US lawmaker responses to the news.

While XRP will likely fall back from early morning highs. US lawmaker threats of passing the baton to regulate the digital asset space to the CFTC would be bullish. However, the talk of an SEC appeal would likely see XRP give up a hefty portion of Thursday’s gains.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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