Is This One Catalyst for XRP a Sell-the-News Event?

XRP (CRYPTO: XRP) just got a catalyst that was originally anticipated for mid-April. It was very positive, and the impact will resonate for years to come.

But it's often the case in the financial markets that it's wise to sell an asset upon receiving significant news, as many catalysts are anticipated by investors who are only concerned with the asset's future performance. Is that going to be true this time around, or is XRP going to be worth holding for the long run?

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This legal decision will have major consequences

The biggest risk facing XRP during the past four years has been the lawsuit brought by the Securities and Exchange Commission (SEC) alleging that Ripple, the company that issues the coin, had conducted an unregistered securities offering. The crux of the SEC's argument was that Ripple should have filed the paperwork asking for permission to sell it, rather than simply advancing without asking.

On March 19, the SEC dropped that lawsuit, finding that XRP is not classifiable as a security. The coin's price jumped by 12% as a result.

This move follows similar ones recently, such as when the agency dropped its cryptocurrency-related enforcement actions against Coinbase Global and Robinhood Markets.

Now, it looks like XRP has an obstacle-free runway to continue gaining new users in the global financial industry. The coin's gravest single risk is now defused, likely permanently. So why would any investor want to sell it right now?

In short, because there were many indications that the SEC would take the action that it did. The new administration is openly crypto-friendly and has chosen leaders for financial regulatory agencies to incorporate that perspective into policy. The expectation was that if Coinbase and Robinhood had their lawsuits dropped, Ripple would have a very good chance of the same.

And, since markets are inherently forward-looking, the case for selling XRP right now essentially states that since this catalyst is safely in the bag, there's little chance of more upside for holders. If there were such upside, perhaps stemming from the core drivers of value for this investment, the market would appreciate that and then price those in as well. So until there's new information, it's all downhill from here -- at least that's how the argument goes.

Zoom out, then decide what's right for you

If you have a long-term perspective for your XRP investment, as you should, there is not really a compelling reason to sell your coins now. Here's why.

The regulatory framework that XRP exists in was just significantly clarified. It is very likely that further clarification is going to occur as a result of ongoing efforts to that end by the SEC and other regulatory bodies. Therefore, the market cannot possibly be pricing in all of the upside for this coin related to regulations. And, while the market's expectations on this front are already fairly high, regulations are far from the only driver for XRP to gain in value.

Investors, banks and other financial institutions that were reluctant to buy XRP before due to the ongoing legal risks now have a green light to proceed. They will not all be proceeding with their investment in the coin at the exact same moment. Nor will they be committing all of their allocated capital to it all at once. Once they do start to buy it, the ongoing technology development of its chain, as advanced by Ripple, might later convince them to buy even more of it.

In other words, there is not much evidence to support the idea that XRP is going to stagnate now that it has passed a major hurdle. On the contrary, its horizons can grow to be much larger now compared to before, especially considering that Ripple itself won't need to be fretfully socking away cash in anticipation of potentially paying a gargantuan fine, leaving more capital for reinvestment into the chain.

This isn't a sell-the-news event. If anything, XRP is now worth buying more than it was before.

Should you invest $1,000 in XRP right now?

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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coinbase Global and XRP. The Motley Fool has a disclosure policy.