- XRP price action over the past decade has foreshadowed an inverse head-and-shoulders setup.
- This technical formation has resulted in massive rallies to the upside, and Ripple appears to be setting up another one.
- If successful, the current pattern forecasts a nearly 60% rally on the breakout, allowing XRP to retest $1.234.
- However, the remittance token needs to withstand more losses for the technical formation to be complete.
XRP price rallied nearly 100% after Ripple scored a partial victory against the US Securities and Exchange Commission (SEC) in the SEC vs. Ripple lawsuit. Since then, the remittance token has dropped 36% and is on the verge of falling even more. But there is a silver lining to all of this. Ripple bulls seem to be planning an explosive breakout that could push XRP price to two-year highs.
XRP price and history of inverse head-and-shoulders
XRP price, in its 10-year history, has registered multiple exponential moves. Almost all of these moves were preceded by an inverse head-and-shoulders setup. On the weekly chart, there are seven instances where Ripple created this exact pattern. The highest breakout rally for the XRP price was a 4,300% increase in 2017, and the latest rally after the verdict in the SEC vs. Ripple lawsuit was an 80% upward move.
In its 10-year history, ALL major, mind-melting $XRP moves had this pattern pop up before it.
— Akash (@Mangyek0) August 16, 2023
...
Now, a similar setup can be seen on the 3-day chart.#XRPArmy #XRPCommunity https://t.co/ATsc5UjXag pic.twitter.com/KWOfXLwDb9
SEC vs Ripple lawsuit FAQs
Is XRP a security?
It depends on the transaction, according to a court ruling released on July 14:
For institutional investors or over-the-counter sales, XRP is a security.
For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.
How does the ruling affect Ripple in its legal battle against the SEC?
The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token.
While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.
What are the implications of the ruling for the overall crypto industry?
The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at.
Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say.
Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.
Is the SEC stance toward crypto assets likely to change after the ruling?
The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation.
While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.
Can the court ruling be overturned?
The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.
Ripple bulls could trigger 125% rally for XRP holders
Currently, XRP price is in the process of setting up another inverse head-and-shoulders setup, which forecasts a nearly 60% rally to $1.234.
An inverse head-and-shoulders technical formation is as the name suggests. It contains three distinctive valleys, with the central one typically lower than the other two. The valley in the center is the head, and the adjacent ones are the shoulders. The peaks of these swing lows can be connected using trend lines, revealing a neckline. Once XRP price breaches the neckline decisively on the respective timeframe, the setup is said to be completed.
The ongoing pattern for Ripple stretches from late December 2021 to date. The left shoulder was formed in February 2022, and the head in June 2022. The right shoulder is yet to form, which would likely push XRP price down by another 11% to tag the $0.548 and $0.532 levels. A subsequent bounce from these levels could propel the remittance token anywhere between 35% to 40% to reach the neckline.
Once this declining trend line – which connects the three swing highs starting from February 2022 – is breached, it will signal a breakout. In such a case, the 59% target for XRP price is obtained by measuring the distance between the right shoulder’s peak to the head’s lowest point and adding it to the breakout point at roughly $0.777. This move projects a target of $1.234. While a nearly 60% rally might not hold up with historical rallies, measuring the XRP price rally from $0.548 to $1.234 would mean a 125% upswing.
XRP/USDT 3-day chart
On the other hand, if XRP price faces immense selling pressure after retesting the $0.548 support level, the chances of a breakdown are high. In such a case, Ripple’s token would likely fall 23% and tag the next stable support levels at $0.433 and $0.413.
A failure to hold above these barriers on the three-day chart would produce a lower low and invalidate the bullish thesis. Such a development could trigger a steep 33% correction to $0.274.
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