Investors are taking another look at the futures market linked to the payment-focused cryptocurrency XRP, hoping that Ripple Labs, the company that issued the token, will win and instigate its legal battle against the US Securities and Exchange Commission (SEC) to taking more risks in the wider market.
XRP is up 57% since March 22, reaching a ten-month high of $0.584, according to CoinDesk data.
Since the start of the rally, nominal open interest, or the dollar value tied up in precarious and active contracts traded on futures and perpetual futures exchanges, has risen nearly 90% to $843 million, the highest since December 2021, according to data from Coinglass.
An increase in outstanding interest accompanied by a rise in prices typically suggests new money inflows on the bullish side and would confirm the uptrend. At the time of writing, funding rates – representing the cost of holding bullish long or bearish short positions – were positive on most exchanges, indicating the dominance of bullish leveraged traders. The broader market was also on the rise, with bitcoin rising above $28,000 in a move that reversed losses from early this week after the US Commodity Futures Trading Commission (CFTC) sued Binance.
“The bullish momentum comes from the Ripple vs. SEC case, where optimism for Ripple’s victory appears to be becoming more dominant,” Lewis Harland, portfolio manager at Decentral Park Capital, said in a market update.
“Perhaps Ripple’s victory will trigger a bullish impulse along the risk curve (alt season),” Harland added. Alt season is a crypto jargon that describes a period of time when alternative cryptocurrencies such as XRP, SOL, DOT, gaming tokens, DeFi coins and meme coins outperform bitcoin and ether.
Ripple and XRP are not interchangeable. While Ripple is a fintech company focused on building a global payments network, XRP is an independent digital asset used for things like online payments and currency swaps.
In late 2020, the SEC accused the Ripple Network of selling unregistered securities after the platform sold $1.3 billion worth of XRP. Ripple has long maintained that XRP is a commodity, not a security, as claimed by the SEC.
Securities are more tightly regulated than commodities and require more transparency and reporting from companies. Therefore, Ripple’s win is likely to cheer up the broader market, but a loss could reignite risk aversion.
“A win for the SEC could also affect other altcoins as they are likely to be subject to more regulation,” Markus Thielen, head of research and strategy at crypto service provider Matrixport, said in a note to clients on Monday. “However, if Ripple is successful in this case, XRP’s legality in the US market will be solidified and help drive a price rally.”
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