Why XRP Is Sinking Today

XRP (CRYPTO: XRP) is falling in Monday's trading. The cryptocurrency's share price was down 6.9% over the last 24 hours as of 2:40 p.m. ET. At the same point in the day's trading, Bitcoin and Ethereum were down 5.1% and 7.7%, respectively.

XRP and other cryptocurrencies are seeing sell-offs in today's trading due to a combination of bearish catalysts. In addition to concerns about a new artificial intelligence (AI) model launched by a Chinese company, the crypto market is also seeing sell-offs due to fears that the Federal Reserve will not lower interest rates in the near future.

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DeepSeek's new AI model spurs sell-offs for XRP and other cryptos

Last week, Chinese technology specialist DeepSeek unveiled its new open-source AI model. The new system offers performance advantages compared to OpenAI's ChatGPT and other leading AI models in some respects. As more details about the new AI system have emerged and the market has had time to weigh its potential implications, bearish sentiment has emerged connected to perceptions about the state of the AI race between the U.S. and China.

DeepSeek's AI software has been made freely available and was reportedly trained using significantly less hardware power than OpenAI's most advanced commercially available GPT model. While success for DeepSeek in terms of app downloads and model performance may not mean much for XRP on a fundamental basis, the tech is highlighting broader market risks related to relations and technological competition between the U.S. and China.

XRP's token price is also being pressured by Fed rate concerns

Recent reports suggest that the Federal Reserve will likely hold off on a delivering an interest rate cut at its next meeting. The central banking authority delivered consecutive rate cuts with its last three meetings, but it's reportedly planning to keep the benchmark rate at its current level and weigh the impacts of new Trump administration policies before making potential adjustments.

Investors have been hoping that the Fed will deliver significant rate cuts this year and help pave the way for a bullish market backdrop. Cryptocurrencies, growth stocks, and other speculative assets tend to perform much better in a low-rate environment, but the Federal Reserve may want to keep rates relatively high in order to tamp down on inflation. XRP's token price will likely continue to see significant moves in conjunction with evolving reads on the Fed's rate policy this year.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.