“XRP Leads Crypto Losses as Strong Dollar Pressures Markets”

XRP led the crypto market losses on the second-last day of the year, as a stronger U.S. dollar weighed down global currencies and assets, including Bitcoin. Asian equity markets also saw declines on Monday.

Over the past 24 hours, XRP fell more than 5%, with dogecoin (DOGE), Solana’s SOL, ether (ETH), and BNB dropping as much as 2%. Overall market capitalization dropped 3%, while the broad-based CoinDesk 20 (CD20) index, which tracks the largest tokens excluding stablecoins, shed 3.5%.

U.S. equities experienced declines on Friday, with investors trimming their positions amid uncertainty heading into the end of the year. An Asia Pacific index reversed five days of gains, and futures contracts on U.S. indexes like the S&P 500 and Nasdaq pointed to losses in the U.S. session by the afternoon hours in Asia.

Bitcoin (BTC) has historically moved inversely to the U.S. Dollar Index (DXY), which measures the greenback’s exchange rate against major fiat currencies such as the euro. Strength in the dollar is largely attributed to President-elect Donald Trump’s upcoming inauguration in late January, where he has promised policies aimed at boosting the economy.

As the dollar strengthens, dollar-denominated assets become more attractive compared to cryptocurrencies. Investors often shift their focus to traditional investments like U.S. Treasuries or stocks, which tend to perform well in a strong dollar environment.

This shift has dampened expectations for a continued crypto rally, with lower liquidity and year-end profit-taking weighing on prices. Despite this, a “Santa rally,” a term used to describe a bullish seasonal trend in December, has failed to materialize, with Bitcoin seeing a nearly 4% drop in price this month, although it remains up 47% for the final quarter of the year.

Furthermore, lowered expectations for continuous interest rate cuts by the Federal Reserve have contributed to the decline in Bitcoin and crypto prices over the past month.

However, some remain optimistic about the long-term prospects for cryptocurrencies, believing that favorable regulatory policies may help drive the market forward, despite the strong dollar and the lack of rate cuts.

“Despite the ongoing consolidation fueled by the interest rate cut last week, Bitcoin and altcoins have not yet reached their price peaks,” said Maksym Sakharov, co-founder of WeFi, in a Telegram message to CoinDesk. “The recent selloffs are more a knee-jerk reaction to uncertainties related to macroeconomic policies. The Fed is preparing for higher rates next year, even with inflation near the 2% annual target. This could shift the direction of monetary policy and impact the market.”

Sakharov added, “When President-elect Donald Trump takes office, more corporate firms are expected to enter the Bitcoin ecosystem as regulations become more favorable. If these projections play out, Bitcoin’s price may decouple from macroeconomic factors, reducing the intense volatility it typically faces.”