XRP’s recent dip comes amid increasing uncertainty in the market, primarily due to two significant factors. First, the scheduled release of 1 billion XRP tokens by Ripple on October 1 has exerted slight downward pressure on the token’s price. This release is part of a regular practice where XRP is unlocked from escrow, but any increase in the circulating supply can lead to price corrections, especially if demand does not match the new supply.

Second, there are mounting discussions around the possibility of the U.S. Securities and Exchange Commission (SEC) appealing a recent court ruling related to Ripple. This appeal is expected to be filed by October 7, potentially creating short-term volatility for XRP.

Factors Contributing to the Decline

While XRP has shown a positive return year-to-date, with about a 20% gain overall, the recent unlocking of tokens coincides with market anxiety. The SEC’s ongoing litigation against Ripple has been a hot topic since the court ruled in favor of Ripple in July, requiring the company to pay $125 million in penalties instead of the $2 billion initially sought by the SEC. This ruling was viewed as a significant win for Ripple, bolstering investor confidence temporarily.

However, as the appeal deadline approaches, XRP has started the month on a muted note. The two main contributors to this recent decline are the increased circulating supply due to the token release and the potential legal challenges from the SEC.

Legal Landscape: The SEC’s Possible Appeal

Legal experts are closely watching the SEC’s actions, with many anticipating that the agency will indeed appeal the court’s July ruling. Marc Powers, a blockchain professor and former SEC enforcement attorney, has indicated that the SEC is likely to challenge the decision, particularly concerning how Ripple’s XRP sales are classified.

In the previous ruling, the court found that Ripple’s public sales of XRP did not violate securities laws, categorizing these differently from direct sales to institutional investors. This classification is critical, as the SEC aims to maintain consistent legal interpretations across jurisdictions, especially within the influential Second Circuit Court that governs major financial centers like New York.

As journalist Eleanor Terrett noted, there is a consensus within the SEC against the court’s decision, further fueling speculation about an impending appeal. The outcome of this appeal could significantly impact XRP’s price and market sentiment.

Short-Term Correction and Future Outlook

As XRP’s price faces pressure, analysts are suggesting that a short-term correction may be in the cards. The Relative Strength Index (RSI) for XRP currently hovers around the neutral 60 range, indicating that while the asset is not overbought, it could move towards overbought territory if conditions are favorable. This suggests that the recent weakness might be temporary.

The Bollinger Bands indicate that volatility has remained stable, and if XRP can maintain support above the $0.60 mark, it could potentially rebound toward $0.70. The market’s absorption of the newly unlocked tokens will be critical in determining whether XRP can regain its footing.

What’s Next for XRP?

In summary, XRP’s recent 4% drop highlights the market’s sensitivity to both supply dynamics and regulatory uncertainties. The scheduled release of 1 billion XRP tokens has added pressure on prices, while the potential SEC appeal looms large in the background.

Investors and traders are advised to keep a close eye on developments surrounding the SEC’s actions as the October 7 deadline approaches. If the SEC decides to appeal, it could trigger further volatility for XRP. Conversely, if the market absorbs the additional supply effectively, and if macroeconomic conditions remain favorable, XRP may see a resurgence in the weeks ahead.