Why is XRP Currently Dropping: Is the Looming Doubts on Fed Rate Cuts Dragging it Down?

XRP has dropped to $2.2 level, the price is down by more than 8%. The market cap touched $137.88 billion. The token is trading below the 200-day simple moving average. The overall crypto market cap has reduced to $3.27 trillion, down by 6%. The overall Fear and Greed Index of 22 suggests the investors are cautious.

The major reason for the overall market slump is attributed to fears about the uncertainties of upcoming Fed rate cuts. The mounting doubts led to increased whale activity even around Bitcoin, dragging down the entire crypto market. 

Crypto Market Slumps As Uncertainties About Fed Rate Cuts Heighten 

The uncertainties around the Fed rate cuts have heightened, with more policymakers turning against the rate cuts or being neutral regarding the same. The latest to join the club is Federal Reserve Bank of Minneapolis President Neel Kashkari.

In his latest interview, he stated that he was in favour of a pause in October as data showed economic resilience. However, as for the upcoming December cuts, he said that he could make a case depending on how the data went to cut, he could make a case to hold, and they would have to see. Many policymakers are either advocating a hawkish policy or sitting on a fence, increasing uncertainty in the market. Mary Daly, president of the San Francisco Fed, had earlier stated it was premature to say definitely ‘no cut’ or ‘definitely a cut.’ Moreover, Boston Fed President Susan Collins commented on Wednesday, November 12, that she saw several reasons to have a relatively high bar for additional easing in the near term.

The policymakers are worried about a weakening labour market and rising inflation. Even though the 43-day-long U.S government shutdown has ended, the crucial economic data releases are yet to speed up. 

The uncertainty over the matter had sent strong bearish signals to the crypto market. Maintaining a higher interest rate is not good news for the crypto as it makes the investors risk-averse. The trader’s expectations on the December 9-10 rate cut have gone down below 50%. 

Lower interest rates increase liquidity in the market and hence boost risk appetite. Additionally, it makes traditional assets less attractive while a higher interest rate strengthens the dollar. The liquidity factor is crucial for the riskier and emerging crypto market. Thus, the looming fears dragged the whole crypto market, and XRP is not spared either.

BTC Price Plunges, Dragging Down the Entire Crypto Market, with XRP Reaching $2.2

Amid the increased whale activities and profit-taking after the rebound following the reopening of the U.S government, Bitcoin plunged below $100k. Bitcoin is currently trading at around $97k level. Being the largest and most adopted cryptocurrency, it makes the entire market move along with its price movements. The technical breakdown of Bitcoin has affected XRP’s price as well. 

Mixed Impact From Canary XRP ETF Launch

The Canary Capital’s XRP ETF (XRPC), despite making a stellar debut with $58 million trading volume on the opening day, faced doubts about the funding dynamics. The profit-taking and controversies around the ETF have led to a mixed impact, with a larger market crash overshadowing the bullish impact from the Nasdaq debut.

The Bottom Line: What’s Ahead for XRP?

If the XRP ETF can garner more institutional investments, it will send a strong bullish signal to the market. Besides, Ripple is aggressively pushing institutional use cases for XRP and other Ripple products. The company was also able to form new strategic partnerships and investments, reflecting the investor confidence in the network. Nevertheless, the direction of the Fed policy is crucial in deciding the price of XRP for the upcoming month.