Top Developer Says XRP Will See Slight Periods When Prices May Not Move Sharply Despite ETF Demand

Software engineer Vincent Van Code has highlighted how a loophole in the concluded Ripple vs. US SEC legal rift will affect the impact of US spot ETFs on XRP.

Notably, Ripple and the US Securities and Exchange Commission decided to withdraw their appeal on the 2023 ruling by US District Judge Analisa Torres. The verdict was a partial victory for both parties, stating that XRP is not a security, nor do its sales in the secondary market constitute offering unregistered securities.

However, Judge Torres ruled that past sales to institutions violated securities laws and issued an injunction preventing XRP from defying these terms in the future. However, Ripple would avoid sales to institutions altogether to avert regulatory issues.

Notably, efforts to change this ruling under the current pro-crypto regime fell apart before Ripple and the US SEC finally decided to end the years-long case.

Impact on XRP ETFs?

Meanwhile, serial AI startup founder Van Code shed light on this ruling and how it could potentially affect XRP’s institutional accrual. 

Notably, Ripple holds a large chunk of the token’s supply in escrow as part of its long-standing measures to control supply. Data from XRPScan shows that 34.76 billion tokens are currently in escrow, over 34% of the asset’s maximum supply.

Typically, ETFs purchase an underlying asset through authorized participants, who acquire it either through open-market purchases or over-the-counter (OTC) trading. As a large holder of XRP, Ripple could have been an ideal venue to buy XRP. This would ensure these asset managers secure the tokens before they enter the market and neutralize existing demand.

However, the 2023 injunction means Ripple may not be able to sell directly to these ETFs. Van Code believes this would ensure that the XRP price does not move sharply, as the process of matching Ripple’s XRP unlock with ETF demands could neutralize the impact.

There are already growing concerns that XRP has not reflected the price predictions of many upon the ETF launches. While community member VanQish has explained some of the reasons for this, Van Code suggests that Ripple’s inability to sell XRP directly to institutional players could also affect how XRP moves relative to demand.

Is There a Way Out?

But Van Code noted that Ripple “only sell what it needs.” Notably, of the 1 billion XRP tokens released monthly, Ripple re-locks portions it does not require. This suggests that rebalancing efforts will ultimately drive XRP price growth when they align with institutional demand.

Remarkably, the software engineer claimed that asset managers could be speaking with Ripple about the timing of its monthly release. However, this is not practicable because Ripple does not have control of the fundamental escrow terms. The safe-lock has been automated to release and relock unused tokens, all of which the XRP Ledger enforces.

Nonetheless, analysts have tipped that ETF inflows will drive XRP to unprecedented prices, regardless of how asset managers buy. Chad Steingraber predicted that ETFs could create a supply shock, potentially driving XRP to $225 per coin.