XRP Drops Over 5% as Dollar Strength Impacts Crypto Market
A stronger dollar tends to increase the price of dollar-denominated assets like Bitcoin and gold, causing a slowdown in demand for cryptocurrencies in the short term.
What to know:
- XRP led the decline in the cryptocurrency market as the dollar's strength impacted fiat and digital assets, including Bitcoin.
- BTC trends inversely to the U.S. Dollar Index (DXY), which measures the dollar's exchange against major currencies.
- Optimism regarding crypto regulation persists, despite the current humor less favorable for cryptocurrency prices.
Market Update
XRP fell over 5% in the last 24 hours, impacting other cryptocurrencies like Dogecoin (DOGE) and Solana's (SOL), both dropping up to 2%. The overall market capitalization decreased by 3%, while the CoinDesk 20 (CD20) index also fell by 3.5%.
US equities saw declines as investors adjusted their portfolios amid uncertainty as the year ends. A significant index in Asia stalled after a five-day increase, and futures for U.S. indexes, including the S&P 500 and Nasdaq, indicated possible downtrends.
BTC's movements historically contrast the DXY, which measures the value of the dollar against major fiat currencies like the Euro.
Forward Outlook
Strength in the U.S. dollar seems likely as President-elect Donald Trump prepares to take office in January, where he is set to implement economic policies that could shape the dollar's future.
When the dollar rises, assets denominated in dollars appear more appealing, thus shifting investor preferences towards traditional investments like U.S. Treasuries and stocks rather than cryptocurrencies.
This dynamic has dampened hopes for continued bullish momentum as liquidity tightens and year-end profit-taking occurs among traders. December saw a nearly 4% dip in BTC prices, despite a 47% increase for the last quarter of the year, illustrating complex market behaviors.
Some experts maintain optimism around potential favorable crypto regulations that could uplift the market, despite the absence of significant rate cuts or a strong dollar.
“Unlike what many believe, Bitcoin and altcoins have not hit their price tops despite the ongoing consolidation fueled by the interest rate cut,” said Maksym Sakharov, co-founder of WeFi. “The market reaction is just a temporary response to macroeconomic uncertainties.”
“However, once President-elect Donald Trump takes office, expect more corporate participation in the Bitcoin space as regulations become more favorable. This might lead Bitcoin's price to deviate from the typical market fluctuations,” he added.
