XRP led cryptocurrency losses on the penultimate day of this year, as a stronger dollar hit global currencies and assets, including bitcoin, and Asian stock markets fell on Monday.
XRP sank more than 5% in the last 24 hours, and dogecoin (DOGE), Solana’s SOL, ether (ETH), and BNB fell as much as 2%. The overall market capitalization fell 3%, while the broad CoinDesk 20 (CD20), an index that tracks the largest tokens, minus stablecoins, lost 3.5%.
U.S. stocks fell on Friday and investors trimmed positions amid uncertainty ahead of the end of the year. An Asia Pacific index reversed five-day gains, while futures contracts on the US S&P 500 and Nasdaq indexes indicated losses in the US session as of Asian afternoon hours.
Historically, BTC has moved in the opposite direction to the US Dollar Index (DXY), which measures the exchange rate of the dollar against major fiat currencies, including the euro.
The dollar’s strength largely comes before President-elect Donald Trump takes office in late January, where he has promised several policies to help the economy in the coming years.
When the dollar strengthens, dollar-denominated assets become more attractive compared to cryptocurrencies. Investors prefer traditional investments such as US Treasuries or stocks, which generate returns in a strong dollar environment.
However, this has dampened hopes for a continued cryptocurrency rally amid lower liquidity and year-end profit-taking among investors. A “Santa rally,” a colloquial term for the bullish seasonality seen in December, backfired with a nearly 4% drop in BTC prices this month (it’s still up 47% in the last quarter, data shows ).
Elsewhere, reduced expectations of continued interest rate cuts by the Federal Reserve have contributed to a drop in bitcoin and cryptocurrency prices over the past month.
Some, however, remain optimistic that long-term crypto policies will help boost the market despite the lack of rate cuts or a strong dollar.
“Contrary to what many believe, Bitcoin and altcoins have not reached their peak prices despite the ongoing consolidation driven by the interest rate cut last week,” WeFi co-founder Maksym Sakharov told CoinDesk. in a Telegram message. “The massive sell-offs recorded are due to the market’s instinctive reaction to the uncertainties associated with macroeconomic policies. The Federal Reserve is preparing for higher numbers next year even as inflation approaches the 2% annual benchmark. This could change the direction of monetary policy and affect the market.
“But when US President-elect Donald Trump takes office next year, more corporate companies will enter the Bitcoin ecosystem as regulations become favorable. If these projections come true, the price of Bitcoin could also become decoupled from the macroeconomic factors that generally trigger its intense volatility,” Sakharov added.
