XRP Pump and Dumps, How Will Regulators Respond?

The XRP price has been particularly erratic in recent days. The digital currency gained 153% between Jan. 30 and Feb 1, before crashing 51%.

Similarly, unconventional price action in GameStop, Nokia, and Dogecoin may prompt action from global financial regulators.

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A Rough Ride for XRP Holders

XRP holders have had it rough since the digital currency’s January 2017 all-time high. Investors have had to watch their holdings depreciate while other cryptocurrencies surpass their all-time highs.

Casting a black cloud over XRP’s future is the US Securities and Exchange Commission (SEC). The financial regulator alleges that Ripple illegally sold XRP as an unregistered security.

As BeInCrypto reported, exchanges have been delisting XRP following the SEC announcement. Grayscale Investments also dropped its XRP Trust, creating additional selling.

A Change in Fortunes?

The XRP price suddenly started increasing between Jan. 27 and Feb. 1. Similarly, the number of addresses more than doubled over the same period, and social media mentions exploded.

There seem to be two main factors behind the surge in interest – Ripple’s response to the SEC and a coordinated effort to pump XRP on social media. In its rebuttal, Ripple claims that XRP is not a security. The firm, therefore, contends that the SEC should not have jurisdiction over XRP.

The second and arguably more important driver of XRP price was coordinated buying on social media. Inspired by the recent GameStop debacle, XRP community members planned their own pump.

Among those stocks (and cryptos) exhibiting strange behavior in recent days are Nokia, AMC, Blackberry, and Dogecoin. Pumps have been orchestrated in online communities such as subreddits r/WallStreetBets and r/SatoshiStreetBets.

In the GameStop example, the motive was to ‘short squeeze’ Wall Street traders who were attempting to drive GME stock into the ground. The buying pressure of literally millions of Reddit users pumped, leaving shorters out of pocket.

The same tactic was later attempted on other stocks. BeInCrypto recently reported on dogecoin’s (DOGE) own 800% rally. On Twitter, Reddit, and in two Telegram groups (with more than 300,000 combined members), the idea was put forward to buy XRP at exactly 13:30 CET on Feb. 1.

Without the political motive of the GME pump, people front ran the buying event. The XRP price rose from around $0.25 to a brief high above $0.70 between Jan. 28 and Feb. 1. As the 13:30 buying time arrived, many dumped their holdings, and the price plunged back to around $0.35 in hours.

How Much is Social Media Influencing Markets?

Recent examples of coordinated pumps demonstrate social media’s growing influence on markets. The buying was orchestrated largely on Reddit and Telegram groups.

Similarly, influencers appear to be having a bigger impact on markets than ever. Whether it’s the influence of the collective consciousness in groups like r/WallStreetBets or direct efforts by well-known individuals, the power to influence prices is being harnessed, and in the GME example, weaponized.

Some examples include Tesla and SpaceX CEO Elon Musk changing his Twitter profile description to read ‘bitcoin.’ The price of the leading digital asset rose back above $37,000 on the news.

Musk has also previously created DOGE price pumps. Tweets like the one below show his soft spot for the ‘meme coin’:

Merry Christmas & happy holidays! pic.twitter.com/uk6NSPwR9R

— Elon Musk (@elonmusk) December 25, 2020

Kiss bassist Gene Simmons mentioned both DOGE and XRP investments on Jan. 31. Stressing it was not financial advice, he tweeted:

Not recommending any of these to anyone. But yes, I also bought Dogecoin, XRP and others. Make of it what you will.

— Gene Simmons (@genesimmons) February 1, 2021

How Will Regulators Respond?

With the hive mind moving asset prices, it may only be a matter of time before regulators respond. As CNBC reported, investors are growing increasingly worried about a clampdown.

Several analysts called on the SEC to look into the matter. Dan Lane, an analyst at British trading app Freetrade, told CNBC:

“The reality is that the new brand of charismatic leader has a public platform now and isn’t confined to the boardroom. It’s up to regulators how they deal with that but, eventually, the onus will be on them to update the rule book.”

What’s Next for XRP?

Despite the lawsuit, Ripple appears to be attempting to strengthen its influence in non-US markets. For example, the company partnered with a large Middle Eastern exchange on Jan. 27. The partnership should lead to additional demand for Ripple’s services in India and the UAE – particularly for remittance payments.

However, the recently orchestrated pump may damage the credibility of XRP. 

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