TL;DR
- Jerome Powell, the current Chairman of the US Federal Reserve, hinted that the central bank might reduce the key interest rates as soon as September this year.
- Rate cuts are typically regarded as bullish for riskier assets, such as crypto, and here’s what ChatGPT thinks about the potential impact on XRP.
Fed Rate Cuts to Pump XRP?
The Jackson Hole speech took place on Friday as the crypto market had braced for impact with a week-long correction that drove BTC from over $118,000 to under $112,000, ETH from above $4,800 to $4,100, and XRP dumped below $2.8 to market a multi-week low.
Although Powell failed to specify whether the Fed will indeed cut rates at its next FOMC meeting in September, his words were perceived as promising by investors, who poured billions of dollars into the ever-volatile, risky crypto market. BTC jumped beyond $117,000, albeit briefly, while ETH rocketed to a new all-time high of almost $4,900.
Another sign that the market will now anticipate a rate reduction in September came from Polymarket as the odds for such a Fed move went from under 60% to almost 80% within hours. Consequently, CryptoPotato explored the potential effects on the two largest cryptocurrencies by market cap, more on which can be found here , and we have now shifted our focus to the third-biggest.
We asked ChatGPT about its take on the matter, and the AI solution explained that lower rates mean that borrowing becomes cheaper and money flows more easily into risk assets, at least in theory. History shows that rate cuts have boosted stocks, gold, and cryptocurrencies, as investors seek higher returns.
For XRP in particular, this could mean more speculative inflows from traders reallocating from bitcoin or even other traditional assets into well-known and established altcoins, such as the second-largest.
It also explained that lower rates weaken the US dollar, which often strengthens bitcoin first but “altcoins like XRP typically follow with a lag – sometimes explosively once capital rotates.”
ETF Exposure and Potential Risks
With roughly ten filings made by different companies to launch their own spot XRP ETFs, Ripple’s community is frequently speculating when such financial vehicles will finally be approved in the US, following those for BTC and ETH. ChatGPT believes the right timing of potential approvals of Ripple ETFs could be massive for the underlying asset.
“A lower interest rate environment makes yield-bearing Treasuries less attractive. Institutions may look harder at crypto ETFs (including pending XRP ETF filings) as a way to diversify.
If an XRP ETF is approved around the same time, rate cuts could supercharge inflows.”
However, the AI chatbot also outlined potential short-term risks. If rate cuts occur due to recession fears, risk appetite will initially decline, which includes bitcoin and the altcoins. As such, it warned that investors might “exit risk assets (including XRP) until confidence in economic recovery returns.”
Overall, though, ChatGPT was bullish on XRP if the US Federal Reserve indeed cuts the rates. It outlined a positive medium-term path for the asset, and a highly bullish run if the ETF stars align.
“Bullish Medium-Term: Fed rate cuts are generally positive for XRP because they boost liquidity, weaken the dollar, and increase demand for alternative assets.
Catalyst Combo: If rate cuts coincide with an XRP ETF approval or favorable legal clarity, XRP’s upside could accelerate toward — or beyond — its all-time high.”
