SEC Causes ‘Ripples’ for XRP, Trump Vetoes Congress | FXTRADING.com - International

XRP declined nearly 40% yesterday alone after SEC confirmed rumours by filing a lawsuit against Ripple's CEO and cofounder.

SEC Lawsuit Caused ‘Ripples’ and then a Tsunami of XRP Selling

Yet the potential for severe losses had not come without warning.

It was a tough night for XRP (XRPUSD) ‘hodlers’ after seeing the cryptocrruency fall over 40% nearly a single session. And this follows on from a -13.2% decline on Tuesday. Yet the potential for severe losses had not come without warning.

On Monday, Ripple’s CEO Brad Garlington had warned markets that they expected the SEC (US Securities and Exchange Commission) to file a lawsuit in the “near future” for selling unlicensed securities. Calling it “an attack on the entire crypto industry and American innovation”, Garlington warned he also expected cofounder Chris Larsen and himself to be named as defendants. By Monday’s close XRPUSD was trading just over -7% lower, which is a mere ‘ripple’ compared to the Tsunami of selling which ensued.

Is XRP a Currency of a Security?

At the heart of the debate is whether XRP is a ‘security’ (of which SEC have regulatory oversight) or a ‘currency’ (which the SEC do not).

Given that SEC have previously ruled bitcoin (BTCUSD) and ethereum (ETHUSD) as ‘currencies’ and not ‘securities’ one could assume XRP is a currency. Yet SEC have ruled Ripple’s XRP as a security because they created all 100 billion units of XRP at the beginning, own a considerable share of them and have reserves allocated for periodic sales. And as the SEC have successfully sued other cryptocurrencies such as Kik and Block.one with the same argument in the past, we doubt Ripple stand much of a chance of beating this lawsuit.

Yet whilst Garlington calls it an attack on the crypto industry, the bearish response has been limited across the crypto space. At the time of writing, bitcoin (BTCUSD) and ethereum (ETHUSD) just trade -2.1% and -6.2% lower, which leave them relatively unscathed compared to XRP’s -61.6% loss this month alone.

Trump Vetoes Congress over US Defence Bill

Trump’s official reason for vetoing the bill is because it “fails to include critical national security measures” and contradicts his administration’s effort to “put America first”. Yet as congress has the power to override Trump’s veto, his real intensions behind the move have been bought into question.

President Trump, ever the showman, has vetoed the US defence bill after hinting the move earlier in the week. Such a move could cause the government to shut down during the pandemic and inflict additional pain upon the US economy during precarious times.

Trump’s official reason for vetoing the bill is because it “fails to include critical national security measures” and contradicts his administration’s effort to “put America first”. Yet as congress has the power to override Trump’s veto, his real intensions behind the move have been bought into question.

On Tuesday he lashed out at the coronavirus relief package and called for the “ridiculously low” $600 stimulus checks be raised to $2000 for American people. Whilst he appears to be trying to strongarm congress into getting what he wants ‘for the people’, if congress can override him anyway it appears futile. But given Trump is expected to campaign in 2024 he can now be seen as the President who did his best for the American people as he left office, regardless of the outcome.

And this likely explains why markets have taken Trump’s veto within stride. US indices closed to fresh record highs led by the Dow Jones (US30) at 0.4% higher and volatility remained relatively low at around 50% of their usual daily ranges. Commodities enjoyed a better session with WTI (WTI) and Brent (BRENT) gaining 2.3% and 2.2%, whilst gold (XAU/USD) silver (XAG/USD) were 0.6% and 1.7% respectively.

Brexit: Back of the Fishing Net?

It appears that Brexit negotiations have made progress over the one major outstanding issue; fishing grounds.

Whilst not confirmed, it has been reported that the UK are willing to reduce EU’s fishing quotes down to 25% from 35% and include a 5.5-year transition period. Fisheries have been disputed because the UK have always seen UK fishing waters as “first and foremost for British boats” yet the EU wanted access for its boats as part of a ‘fair’ free-trade deal (where the UK would then avoid tariffs and taxes). And both parties have refused to budge until now.

Earlier, a report from a British Tabloid claimed a deal between UK and EU had been agreed and then rumours surfaced that Britain’s PM Boris Johnson was due to give a press release. Whilst either scenario is yet to be confirmed, the British pound has remained firm in anticipation for an announcement. GBP/USD traded 1% overnight and was the strongest major against the US dollar, whilst the pound was also broadly higher against its peers: GBP/JPY +0.9%, GBP/EUR +0.8% and GBP/CHF +0.8%.

 

 

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