Why XRP (Ripple) Is Plummeting Today

The crypto token XRP (CRYPTO: XRP) is trading lower on Friday, losing 6.8% as of 1:30 p.m. ET, and was down as much as 7% earlier in the day. The drop comes as the broader market takes a dive: The S&P 500 and Nasdaq Composite dropped 1.9% and 2.6%, respectively.

The Commerce Department reported that the core Personal Consumption Expenditures (PCE) price index increased by 0.4% in February, more than expected.

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Inflation exceeds projections

While economists had expected a 0.3% bump, February's PCE pushed the 12-month inflation rate to 2.8%, above the projected 2.7%. It marks the largest monthly gain since January 2024.

The PCE is the Federal Reserve's preferred inflation measure for making monetary policy decisions. The higher-than-expected numbers mean that the Fed could further pause any rate reductions. Morgan Stanley Wealth Management's chief economic strategist Ellen Zentner said of the numbers, "It looks like a 'wait-and-see' Fed still has more waiting to do."

Expectations that the Fed will keep interest rates elevated is bad news for XRP's price, as we saw play out today. Investors tend to avoid higher-risk assets (like XRP) amid higher interest rates.

XRP has a valuation problem

In a world of meme coins, XRP stands out as having real-world value; it facilitates interbank and cross-border transactions, something much of the market can't say. However, I think there is a significant disconnect between that value and XRP's current market capitalization of $125 billion. I would avoid XRP.

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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.