Why Shiba Inu, XRP and Bitcoin Cash are falling today

Cryptocurrencies fell today as tensions rose in the Middle East. Investors and pundits have questioned the path of interest rates and whether the Federal Reserve will cut as much as the market believes.

The price of Shiba Inu (SHIB 0.80%) is down about 6.5% this morning, while the price of XRP (XRP -6.40%) and Bitcoin Cash (BCH -1.93%) decreased by 5.7% and 5%, respectively.

Higher oil prices reignite the dollar

The growing conflict in the Middle East is the big news shaking the crypto market. Iran launched 200 ballistic missiles at Israel yesterday. Israel also said it plans to deploy more troops to Lebanon in a “limited, localized” ground invasion against the Iran-backed Hezbollah militant group.

“Rising unrest in the Middle East has propelled oil prices higher and bolstered the dollar’s strength, casting a shadow over Bitcoin and other speculative investments,” said Chris Kline, chief operating officer and co-founder of Bitcoin IRA, according to CNBC.

WTI crude was up nearly 2.9 percent by late morning, while the U.S. dollar index was also trading higher. This is bad news for cryptocurrencies, which are seen as an alternative to major currencies like the dollar. Historically, cryptocurrencies have done better with a weak dollar and worse with a strengthening dollar.

In another cause for concern, BlackRockIts CEO, Larry Fink, recently said publicly that he believes the market is pricing in too many rate cuts. Conformable CME GroupIn its FedWatch tool, traders are betting the Fed will cut its benchmark federal funds rate by another 75 basis points this year and may drop it to 3 percent or less by the end of 2025.

“The relaxation value that is in the forward curve is crazy,” Fink told Bloomberg at a conference in Berlin. “I think there is room for more relaxation, but not as much as the forward curve would indicate.”

Lower interest rates tend to lead to a weaker dollar, so if there is less discounting than market prices are currently doing, that could spell trouble for the crypto’s short-term outlook.

We haven’t seen much token-specific news this morning, but crypto asset management firm Bitwise has filed some initial documents indicating that it would like to start an exchange-traded fund tracking XRP, which was created by the company Ripple. According to CoinDesk, Bitwise has taken the first step in the ETF process by filing a trust entity in Delaware. This would be a positive catalyst for XRP. Locate Bitcoin and Ethereum ETFs have already increased liquidity and exposure to their respective tokens.

Do I buy the drink?

I think it’s clear that the conflict in the Middle East has taken hold this morning. I think XRP would normally be aware of news of a potential ETF, but the sector can move together and the trajectory of interest rates and the dollar overshadows everything else.

I’m not a big fan of altcoins due to their inability to stand out from each other and would rather buy a discount on Bitcoin and Ether. However, I see potential in XRP. XRP’s potential use case for improving cross-border payments is compelling and the token also has a limited supply like Bitcoin, albeit a much larger amount. The potential of an XRP ETF is also very intriguing. Spot ETFs have previously driven large increases in Bitcoin and Ether prices.