Why XRP (Ripple) Is Sinking Today

Key Points

• The Federal Reserve lowered interest rates last week, which has historically been a bullish signal for crypto.

• But the Fed's dot plot threw investors for a loop, as Fed members indicated they expect fewer interest rate cuts in 2026.

• Experts say there was excessive leverage in crypto last week, which seems to now be getting flushed out.

• 10 stocks we like better than XRP ›

Since yesterday afternoon, the price of XRP (CRYPTO: XRP) has traded nearly 4.4% lower, as of 10:09 a.m. ET today for no obvious reason. However, the broader crypto market slumped as investors digested the Federal Reserve's interest rate cut last week and tried to see what could be coming next.

Taking a breather

At first glance, one would think that crypto would have kept steamrolling higher today. The Federal Reserve has cut interest rates for the first time since last December and indicated that more cuts are on the way. However, the Fed's dot plot showed that members of the Fed think there will be fewer rate cuts in 2026 than investors expected going into last week's meeting.

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But in more good news for crypto, the U.S. Securities and Exchange Commission (SEC) recently voted to change the rules for how spot-crypto exchange-traded funds (ETFs) get approved, which should make it easier for more crypto spot ETFs to start trading in the U.S.

Adam Morgan McCarthy, head of research at the crypto data firm Kaiko, told Barron's today that there was likely too much leverage built up after the Fed's rate cut last week. "Funding rates seem to have risen since last week's Fed meeting, suggesting some speculation occurred after the cut," McCarthy said. "There was excess leverage from those speculative bets and the slight decline earlier triggered some liquidations that had a cascading effect."

Not uncommon in crypto

It's not uncommon to see the broader crypto ecosystem move in lockstep. It's also not uncommon to see some large sales trigger other large sales like in the flash crash that happened last month. I'm guessing some traders got concerned by the Fed's more hawkish expectations for 2026, triggering the sell-off.

My position on XRP remains unchanged. The world's third-largest cryptocurrency has potential to disrupt international payments but faces competition and is still extremely volatile, leading me to suggest a smaller, more speculative position.

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Bram Berkowitz has positions in XRP. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.