Why XRP Is Sinking Today

Shares of XRP (CRYPTO: XRP) are tumbling on Tuesday. The cryptocurrency lost 4.7% as of 3:20 p.m. ET and was down as much as 5.2% earlier in the day. The decline comes as the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) also posted losses amid growing economic concerns.

The third-largest cryptocurrency by market cap is feeling pressure, as a new survey released Tuesday shows rising anxiety on Wall Street.

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Recession fears are driving risk-off sentiment

A new CNBC Fed Survey shows the top fund managers, strategists, and analysts around Wall Street are growing more concerned a recession is incoming. The poll revealed that financial experts have raised the probability of a U.S. recession in the next year to 36% from 23% in January, reaching the highest level in six months. The GDP forecast for 2025 dropped from its previous estimate of 2.4% growth to 1.7% growth.

As recession concerns mount, investors appear to be rotating capital away from higher-risk investments like XRP and toward safer assets like Treasury bonds and defensive stocks.

XRP has a valuation problem

I've argued for some time now that while XRP has a clear use case -- unique in a crypto market flooded with meme coins -- its market capitalization is out of step with the actual value it provides. Even after the drop, XRP has a massive market capitalization of $130 billion. I'm not convinced that the market for XRP's border-bridging technology is large enough to justify that valuation, even if it became the dominant player in the space.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.