XRP's price plummeted more than 20% in the week following Ripple CEO Brad Garlinghouse's announcement of the SEC lawsuit conclusion, dropping from a peak of $2.60 to $2.05 despite what many considered a favorable settlement for the company.
What to Know:
- Ripple will pay only $50 million to the SEC, far less than the original $2 billion demand
- XRP briefly rallied after the announcement but quickly lost all gains within days
- Analysts warn the token could fall further to $1.20 if current support levels fail
The long-running legal battle between cryptocurrency company Ripple and the U.S. Securities and Exchange Commission has finally concluded, but XRP investors expecting a sustained price rally have been disappointed.
Despite what appears to be a favorable settlement for Ripple, the company's associated cryptocurrency has experienced a sharp decline in the days following the announcement, showcasing what market analysts describe as a classic "sell-the-news" event.
The conclusion comes after both parties dropped their respective appeals, with Ripple agreeing to pay a significantly reduced penalty of $50 million to the regulatory agency. This amount represents a dramatic reduction from the SEC's initial demand of $2 billion and is even less than the $125 million penalty previously ordered by Judge Torres.
Four-Year Legal Battle Reaches Conclusion
The confrontation began in December 2020 when the SEC filed charges against Ripple for allegedly selling $1.3 billion worth of XRP as unregistered securities. The immediate impact was severe, with numerous cryptocurrency exchanges delisting XRP and business partners distancing themselves from the company.
Throughout the four-year legal process, Ripple secured several favorable court rulings. Most notably, the company's top two executives were fully exonerated of wrongdoing. The SEC did achieve a partial victory when Judge Torres ruled that Ripple must pay $125 million in penalties, but this represented just a fraction of the $2 billion the agency had initially sought.
The case took its final turn last week when Garlinghouse announced on social media platform X that the SEC had dropped its appeal. Stuart Alderoty, Ripple's Chief Legal Officer, subsequently confirmed that the company had also withdrawn its own appeal, effectively ending the protracted legal battle.
While not a complete victory, industry observers generally view the outcome as a moral win for Ripple. The company emerged from years of regulatory uncertainty with a dramatically reduced financial penalty and the ability to resume normal business operations in the United States.
Market Reaction Defies Expectations
Despite what appeared to be positive news, XRP's price performance has contradicted expectations. The token initially responded favorably to Garlinghouse's announcement, climbing from $2.30 to $2.60 within minutes. However, this momentum proved unsustainable.
Within 48 hours, XRP had surrendered virtually all its gains and struggled to maintain support above $2.50. The situation deteriorated further during a broader cryptocurrency market correction, pushing the price down to $2.05 at the time of reporting—representing a decline of over 20% from its recent peak.
This downturn has significant implications for XRP's market position. The token has fallen substantially behind Tether (USDT) in terms of market capitalization, with the gap between them now exceeding $25 billion. Technical analysts have issued warnings that if XRP breaks below the critical $2.00 support level, which is currently being tested, the price could potentially decline further toward $1.20.
The price action reflects a classic "sell-the-news" scenario despite Ripple's apparent legal success and strong business fundamentals. Investors who had anticipated the lawsuit's conclusion may have already positioned themselves accordingly, leading to profit-taking once the announcement was made.
Several potential catalysts could still reverse XRP's downward trajectory in the coming months. These include the possibility of an XRP-based exchange-traded fund (ETF) in the United States or Ripple pursuing a public offering.
However, some market analysts suggest these developments may already be priced into current valuations, indicating further price declines could lie ahead.
Conclusion
The resolution of Ripple's legal troubles with the SEC marks a significant milestone for both the company and the broader cryptocurrency industry.
Despite the immediate negative price action, the regulatory clarity achieved may ultimately benefit XRP in the long term. As Ripple moves forward with regulatory certainty, market participants will closely monitor whether the company can leverage this resolution into sustainable growth and price appreciation for its associated digital asset.