Ripple Price Prediction: Interest Rates Playing Havoc with Capital Markets

rippleRipple News Update

Frequent readers of Profit Confidential might wonder why I glossed over Ripple’s addition of five new partners.

The announcement came earlier this week to little fanfare and I have barely mentioned it until now. (Source: “RippleNet Strengthens Emerging Markets Access into India, Brazil and China,” Ripple, February 21, 2018.)

It’s because Ripple does this all the time. It’s boring.

Yes, Brazil’s largest private sector bank will use “xCurrent” in a test pilot. So will a leading bank in India and a remittance provider in Singapore. Meanwhile, two remittance providers (one in Brazil, one in Canada) will use “xVia” to send payments globally. Hooray…

These partnerships, while useful to Ripple’s overall mission, are not enough to save XRP from the tidal wave of volatility sweeping across markets. After all, none of the new contracts involve XRP specifically, meaning that there is no additional demand for the cryptocurrency.

Ripple (XRP) Price Chart

ripple price chart for 23 feb

I mean, yes, investors might have reacted positively under normal circumstances. But these aren’t normal circumstances—we are entering a weird phase of the business cycle.

Let me explain…

The Federal Reserve is in the process of “interest rate normalization,” which is a fancy way of saying they’re raising the cost of borrowing money. Any individual or business whose debt carries a floating interest is affected by these rate hikes.

The Fed doesn’t really have a choice in this matter. They must raise interest rates in order to avoid surging inflation; slowing down the economy is just a nasty side-effect.

There were three interest rate hikes last year. Then, this past January, the Fed hesitated to pull the trigger because it was the first meeting convened by their incoming chairman.

The next meeting is in March.

Wall Street is absolutely convinced that a rate hike is in the cards. In fact, the CME FedWatch Tool shows that more than 83% of respondents believe that the Fed is going to raise rates. (Source: “CME FedWatch Tool,” CME Group, last accessed February 23, 2018.)

Naturally, this throws a wrench into the decision-making process of investment firms everywhere, which is why capital markets are drowning in volatility.

Analyst Take

Given that cryptocurrencies are responsive to overall market sentiment, we expect to see this volatility continue throughout March. The run-up to—and fallout from—the Fed’s interest rate decision could send markets into a tailspin.

Thereafter, things might return to normal, setting the stage for a second-quarter rally. With this in mind, we maintain our $10.00 Ripple price prediction for 2018.