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The cryptocurrency market faced a turbulent session on the second-last day of the year, with XRP leading the decline. A stronger U.S. dollar weighed on global assets, including Bitcoin (BTC), and sent Asian equity markets into retreat on Monday.
XRP plunged over 5% in the past 24 hours, marking one of its sharpest declines in recent weeks. Dogecoin (DOGE), Solana’s SOL, Ether (ETH), and Binance Coin (BNB) also posted losses of up to 2%. The overall cryptocurrency market capitalization shrank by 3%, while the CoinDesk 20 (CD20) index, which tracks the largest tokens excluding stablecoins, shed 3.5%.
The selloff mirrored declines in U.S. equities, which fell on Friday as investors adjusted their portfolios amid heightened uncertainty. Asian markets reversed a five-day winning streak, with futures on the S&P 500 and Nasdaq signaling further losses in the upcoming U.S. session.
At the heart of the downturn is the U.S. Dollar Index (DXY), which tracks the greenback’s performance against a basket of major currencies. Historically, Bitcoin and other cryptocurrencies have shown an inverse correlation to the DXY. A stronger dollar often diverts investment away from crypto and into traditional assets like U.S. Treasuries and equities, which become more attractive in such environments.
The dollar’s recent strength has been attributed to optimism around incoming President Donald Trump’s pro-growth policies, which are expected to bolster the U.S. economy in the coming years. However, this has dampened hopes for a year-end “Santa rally” in the crypto market, with Bitcoin recording a 4% decline in December despite being up 47% in Q4.
The Federal Reserve’s tempered approach to interest-rate cuts has further strained market sentiment. Yet, some experts remain optimistic. Maksym Sakharov, co-founder of WeFi, suggested that macroeconomic uncertainty and profit-taking have temporarily pressured prices but do not signify long-term bearishness.
“More corporate firms may enter the Bitcoin ecosystem under favorable regulations once President-elect Trump assumes office,” Sakharov told CoinDesk. He predicts Bitcoin could decouple from macroeconomic factors, stabilizing its volatility and paving the way for sustained growth.
Also Read: Ripple to Unlock 1 Billion XRP Tokens in January 2025: What It Means for the Market
As 2024 approaches, the crypto market remains at the mercy of macroeconomic forces, with both risks and opportunities shaping its trajectory.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m your translator between the financial Old World and the new frontier of crypto. After a career demystifying economics and markets, I enjoy elucidating crypto – from investment risks to earth-shaking potential. Let’s explore!
