XRP Plunges 5%, Headlining Crypto Losses as a Firm Dollar Shakes Bitcoin Confidence

A stronger dollar has historically put downward pressure on dollar-denominated assets like Bitcoin and gold, making them more expensive and dampening short-term demand.

On the second-last day of the year, XRP led the decline in the cryptocurrency market as a surging dollar weighed on global currencies and assets, including Bitcoin. Asian equity markets also trended lower on Monday.

XRP dropped over 5% in the past 24 hours, while other major cryptocurrencies like Dogecoin (DOGE), Solana’s SOL, Ether (ETH), and BNB fell by up to 2%. The overall cryptocurrency market capitalization declined by 3%, and the CoinDesk 20 (CD20) index, which tracks the largest non-stablecoin tokens, fell by 3.5%.

U.S. equities closed lower on Friday as investors reduced exposure amid year-end uncertainty. An Asia-Pacific index reversed its five-day gains, and futures tied to the U.S. S&P 500 and Nasdaq indices signaled potential losses for the upcoming trading session.

Historically, Bitcoin tends to move inversely to the U.S. Dollar Index (DXY), which measures the dollar’s value against a basket of major global currencies.

The dollar’s current strength comes in anticipation of President-elect Donald Trump taking office in late January. Trump has promised economic policies aimed at boosting growth, which has further fueled confidence in the dollar.

A strong dollar often diverts investor interest away from cryptocurrencies towards traditional assets like U.S. Treasuries and equities, which offer returns supported by the robust currency environment.

This dynamic has tempered expectations of a sustained crypto rally, especially amid lower market liquidity and year-end profit-taking. The anticipated ‘Santa rally’ — a seasonal trend of bullish market performance in December — has failed to materialize, with Bitcoin prices falling nearly 4% this month. However, Bitcoin remains up 47% in the final quarter of the year.

Additionally, reduced expectations for aggressive interest-rate cuts by the Federal Reserve have contributed to downward pressure on Bitcoin and other crypto assets over the past month.

Despite these short-term challenges, some market participants remain optimistic about the long-term outlook for cryptocurrencies. Maksym Sakharov, co-founder of WeFi, shared his perspective with CoinDesk via Telegram:

“Contrary to popular belief, Bitcoin and altcoins have not yet reached their peak prices despite recent market consolidation triggered by last week’s interest rate cuts. The current sell-offs are largely driven by short-term reactions to macroeconomic uncertainties. The Fed remains cautious, even with inflation nearing the 2% annual target, and this could shape monetary policy in the coming year.”

Sakharov also expressed confidence in potential regulatory improvements under the incoming Trump administration:

“When President-elect Donald Trump assumes office next year, we expect more corporations to enter the Bitcoin ecosystem, driven by clearer and more favorable regulations. If these projections materialize, Bitcoin prices could begin to decouple from traditional macroeconomic drivers, reducing the volatility tied to broader market trends.”