XRP Drops Over 5% as Strong Dollar Affects Crypto Market
XRP led cryptocurrency losses as the dollar strengthened, impacting global currencies and assets including Bitcoin. Asian equity markets declined on Monday.
XRP dropped over 5% in the past 24 hours, while dogecoin (DOGE), Solana’s SOL, ether (ETH), and BNB fell by up to 2%. Overall market capitalization decreased by 3%, with the CoinDesk 20 index losing 3.5%.
US equities fell on Friday as investors reduced positions amid year-end uncertainty. An Asia Pacific index reversed prior gains, and futures contracts on U.S. indexes S&P 500 and Nasdaq indicated potential losses.
Historically, Bitcoin (BTC) moves inversely to the U.S. Dollar Index (DXY), which measures the dollar's value against major fiat currencies like the euro.
Strength in the dollar is attributed to President-elect Donald Trump's upcoming policies aimed at bolstering the economy.
A stronger dollar makes dollar-denominated assets, such as U.S. Treasuries or stocks, more appealing than cryptocurrencies, leading to reduced liquidity and profit-taking among investors. The anticipated "Santa rally" has not materialized, with BTC prices dropping nearly 4% this month, although it remains up 47% for the quarter, according to data.
Additionally, reduced expectations for ongoing interest rate cuts by the Federal Reserve have also contributed to recent declines in Bitcoin and other crypto prices.
Despite these challenges, some industry experts remain optimistic about long-term crypto policies potentially supporting market growth. Maksym Sakharov, co-founder of WeFi, stated that Bitcoin and altcoins have not reached their price peaks despite current market consolidation. He noted that selloffs are primarily reactions to macroeconomic uncertainties. With the Fed anticipating higher figures next year, policy shifts could impact the market.
Sakharov also suggested that under Trump’s administration, favorable regulations may encourage more corporate participation in the Bitcoin ecosystem, potentially decoupling Bitcoin's price from traditional economic factors.