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Litigation and constant price drop

April 29, 2020

Ripple has long held a controversial position in the cryptocurrency industry. The rise of Ripple’s internal token XRP to the position of the second largest cryptocurrency by market cap was enough confirmation for some that the company should play an important role in the industry for many years to come. However, since these graceful days, the momentum has slowed down, apart from some notable bumps The company was hit by rumors and a steady decline in value from XRP.

Ripple does not draw attention to itself online

Because of the ambitious philosophical goals at the heart of the cryptocurrency ecosystem, it’s not uncommon for investors to prefer a particular token and struggle behind their keyboards on social media. The XRP defenders were among the loudest.

Litigation and constant price dropLitigation and constant price drop

But it seems that the token’s “XRP Army” is having trouble filling the ranks. According to a new study by the eToro social trading and investment platform and cryptocurrency data provider The Tie, which points out The XRP discussion decreased 16% in the first quarter of 2020.

While it is important to note that Twitter mentions the ups and downs according to a variety of market movements and business activities, the report found this The number of users in the so-called XRP army has dropped a gigantic 82% since January 2018. However, the token activity problems on social media don’t end there. This was shown by a list of telegram groups compiled on April 15 by a Twitter user Over 63% of @ Ripple members had left since June 2018.

Mohamed Zidan, the chief market strategist at ThinkMarkets, told Cointelegraph this XRP has struggled to find a role in the crypto world and voiced its view that belief in the token is stalling::

“Followers of XRP and other cryptocurrencies gradually decreased, and few people still believe in it. It was important to watch how the markets reacted to cryptocurrencies during the coronavirus pandemic. It has been shown that It cannot be a safe haven, but a risky good. The current stagnation and low volume suggest that their place in the financial equation has not yet been found. “

Massive token statements send a mixed message to investors

One of the most common criticisms of Ripple is the large number of XRP token settlements. While the liquidations previously irritated many crypto investors privately, few people thought of taking action themselves.

The first time cryptocurrency companies face significant legal challenges is usually after an ICO. Due to lack of clarity in regulating cryptocurrencies, many new projects have been accused of violating the U.S. Securities Act, and Ripple is no exception.

Originally filed as a class action lawsuit in May 2018, it claims Ripple violated the American Securities Act as part of an ICO 2013. In the amended March 25 lawsuit, Brad Garlinghouse, CEO of Ripple, was accused of misleading investors over the appointment of XRP while secretly liquidating his holdings.

The amended lawsuit claims that the CEO presented investors with an optimistic outlookTo pose as an investment for “very, very, very long term” and to be “on the HODL side” via XRP in 2017. Despite the positive online postings from Garlinhouse The plaintiffs accuse him of selling 67 million XRP in 2017and added that he liquidated tokens only days after receiving Ripple.

One of the main criticisms of cryptocurrencies is that they have no intrinsic value. While most people who have invested money in digital assets have a vested interest in arguing this. It appears that applicants are disappointed with the actual value of the token:

“The existing 100 billion XRP was created by Ripple when it was founded in 2013 before it was distributed from scratch No functionality except as a speculative investment“”

The plaintiffs also alleged that the company’s own funds were heavily overshadowed by the XRP held by the accused, and argued Ripple’s own rating is largely based on the value of the tokens it owns and sells:

“The value of the defendant’s XRP significantly exceeds the value of Ripple’s income or cash flow from all other sources. Ripple’s dominant value proposition is the XRP token it owns and sells. Ripple’s value proposition as a company depends on funding XRP. However, XRP is wholly or essentially pre-functional and is purchased by investors in anticipation of a profit based on Ripple’s efforts. “

ThinkMarkets’ Zidan told Cointelegraph that the liquidations are aimed at increasing the company’s cash amount to justify its high valuation, but added that further liquidations are expected:

“The liquidation aims to strengthen the company’s cash amount and adjust its financial condition to the valuation. XRP liquidations are likely to continue alongside other cryptocurrencies. If you want this to be stopped or at least slowed down, They have to deliver real value. “

The applicants also questioned how Ripple and Garlinghouse had represented XRP and argued that this was the case The claim that the token was useful as a “bridge currency” was simply to avoid classifying it as a legal value under the class action lawsuit:

“These claims are misrepresentations and omissions of key facts from investors because the usefulness of XRP (or the lack of XRP) is relevant to the value of XRP. Simply put, e.g.These false claims about the usefulness of XRP are nothing more than an attempt to avoid the enforcement of securities laws and to increase the demand for XRP.“”

The Tie reported that the company relied on XRP liquidations in 2019 to maintain positive cash flow: “Although Ripple liquidated only $ 13 million of its XRP holdings in the fourth quarter of 2019 (the lowest in three years), in the third quarter $ 250 million was sold last year. It is not yet known how many XRP tokens Ripple were sold in the first quarter of 2020. “

Ripple’s attempt to dismiss the case was thwarted by U.S. District Judge Phyllis Hamilton, which allowed him to continue in February. However, the progress of the case was accompanied by a warning. Hamilton He asked the plaintiffs to explain their position that Ripple had made fraudulent allegations in more detail, citing that several allegations in the case were too general.

Analyst gives sobering outlook for Ripple

For many years, the concept of cryptocurrencies lurked in the shadows and whispered in the exchange between ambitious and political enthusiasts who dreamed of a better financial system. Among the masses Cryptocurrencies are remembered for the price level that Bitcoin (BTC) reached in 2017, along with those who bought too late and are still waiting to make a profit. Despite the harsh conditions, many companies have so far managed to assert themselves. According to ThinkMarkets’ Zidan, companies like Ripple who rely on their tokens could run out of time:

“”XRP is neither a performance factor nor a trustworthy safe haven. What drives your value? It was only the cryptocurrency craze that rocketed its price. If we only see Ripple as a cryptocurrency provider, it derives its value only from XRP, which technically has no intrinsic value as a store of value. The intrinsic value is derived from the company’s ability to generate sustainable income in the coming years“”

Although Zidan was conservative about XRP’s prospects, he told Cointelegraph that it is still worth noting that the company is able to raise hundreds of millions of dollars in funding rounds – which adds to the assessment:

“The main reason for the disappointing fourth quarter 2019 sales was the decline in institutional sales and the pause in planned sales (stock market sales). The company raised $ 200 million in a Series C round, which brings the company’s value to nearly $ 10 billion, reflecting that there is still interest in a company, but of lesser value. “

Many critics have said over the years that the high prices of the cryptocurrency were just a bubble, and it seems that Zidan agrees with them to some extent. Zidan told Cointelegraph that he believed that High prices are a hangover from the 2017 boom And that companies like Ripple need to find other ways to create use cases for their currencies due to the lack of intrinsic value:

“”The decline can be seen as a means to return to normal growth in the industry as the crypto madness we experienced in 2017 has clearly endedAt that time, XRP and other cryptocurrencies seemed to be a quick scheme to get rich. Over time, however, it becomes clear that it was a bubble and more focused on the sustainability of the company’s revenue stream. I think you should focus on payment solutions, although it won’t be easy to compete with other established companies like PayPal and others. “

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