Executive summary of the impact of XRP Ripple’s favorable court ruling
Liquidity
Following the ruling last week, XRP’s 4%* market depth jumped by $3.8 million. This occurred across Ripple’s main pairs on Binance, OKX, Kraken, Crypto.com, Kucoin, and Coinbase. The 20% market depth grew by a total of $11.5 million.
(*4% market depth refers to money bidding between +2% and -2% from the market)
The impact on liquidity and trading was partly due to Americans being re-allowed to trade XRP on Kraken, Crypto.com, Coinbase, and Bitstamp in the 24 hours following the ruling.
These are not huge liquidity numbers, especially compared to XRP’s $41 billion market cap. This is consistent with Kaiko’s report, which noted that while XRP’s price traded at 15-month highs, the volumes are at just 10-month highs, suggesting that “despite this massively bullish catalyst, global trading activity remains subdued.”
This is a significant event in a small market that is still lacking retail interest, sufficient liquidity, and legal structure.
Legal outcome
On July 13th, a New York federal court ruled that $729 million worth of XRP sold to institutional investors was an illegal securities sale. On the other hand, XRP tokens traded on cryptocurrency exchanges are in the clear.
This ruling stems from the technicality that XRP sold on exchanges may not be coming directly from the issuer. This somewhat confusing logic is likely to be appealed by the SEC and litigated over the next 2–3 years.
For now this ruling is sufficient for exchanges and traders and has lowered the perceived risk of cryptocurrencies in general.
“The only thing this ruling guarantees for cryptocurrency issuers…is continued uncertainty in the cryptocurrency markets, which only Congress can step in to correct,” wrote Preston Byrne, a cryptocurrency legal expert.
Future of digital securities
Digital securities are not bad words; there is just a need for clear regulation. Actually, distributed blockchains are the only conceivable future upgrade for today’s financial assets, which are currently hosted on antiquated systems.
This truth has trickled upward to the highest of the land, the CEO of BlackRock, Larry Fink, who recently said (when asked about Bitcoin), “We are a believer in the digitization of products… We believe we can create more tokenization of assets and securities. It can revolutionize finance again. The blockchain will help you accelerate the process of the transaction. If you have a ‘pure’ blockchain, then we don’t need custodians anymore.” If this is so, legal clarity is only a matter of time.
