XRP Falls 4% as Fed Rate Hike Bets Overshadow Ripple’s Europe Expansion

Quick overview

Despite Ripple and XRP being now legally permitted in Europe, the Ripple (XRP) coin failed to stop its previous bearish trend and is still showing sharp losses in the European trading session. At the time we are writing this article, the XRP coin is trading at $1.07, showing more than 4 percent losses in the last 24 hours.

The reason behind this sharp decline is the overall bearish sentiment in the crypto market. As of now, the crypto market has a total value of 2.14 trillion dollars, showing a 1.79 percent decrease in the last 24 hours. In the meantime, the CMC20 Index is at 126.57, showing 2.52 percent weakness. Meanwhile, the Fear & Greed Index is at 26 (Fear), meaning investors remain cautious.

Moreover, the renewed hawkish Fed expectations were seen as another key factor that is putting pressure on the crypto market, as the higher interest rates reduce investor appetite for risky assets like Bitcoin and XRP. At that time, traders are pricing in over an 80 percent chance that the US central bank will deliver at least one 25 basis points rate hike by the end of this year.

US Dollar Strength and Rate Hike Expectations Weigh on XRP

On the US front, the broad based US dollar managed to gain traction and turned green in the European trading session on Wednesday. As of now, the US Dollar Index is trading at 100.885, showing a 0.2 percent gain. The reason for its recovery can be linked to the fact that many traders are now expecting the US Federal Reserve to keep interest rates higher for longer.

As per the CME Group’s FedWatch Tool, there are 80 percent chance of a 0.25% rate hike before the end of the year. This pushed US bond yields higher and contributed to the gains in the US dollar. As of now, the 10 year yield rose to 4.567 percent and the 2 year yield reached 4.189 percent.

Moreover, the US dollar got some further support from the risk-off market sentiment. The global market sentiment turn red right after US President Donald Trump said he believes the Iran peace deal is effectively over. His comments came after Iran launched attacks on US military sites in Kuwait and Bahrain in response to recent US actions.

Hence, these renewed geopolitical tensions increased demand for the US dollar as a safe-haven asset and put pressure on the riskier assets like cryptocurrencies, including XRP.

Ripple Gets EU Approval, Good News for XRP Growth

On the positive side, Ripple has officially received a Crypto-Asset Service Provider (CASP) license from the Luxembourg financial regulator, making it fully compliant with the European Union MiCA crypto rules. As a result of this, Ripple can legally offer crypto and payment services across all 30 countries in the European Economic Area (EEA) through one license instead of getting separate approval in each country.

It is also worth mentioning that Ripple already holds an electronic money license and now has more than 75 regulatory licenses worldwide. This clearly shows that the company is expanding under clear regulations, which is good for its long term growth.

Therefore, this news was seen as positive for XRP because Ripple can now work more easily with banks, payment companies, and financial institutions across Europe.

ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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