Key Points
A speech from Chairman Powell revealed the Fed may soon proceed with rate cuts.
Lower rates tend to drive crypto and other riskier assets higher.
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The cryptocurrency XRP (CRYPTO: XRP) is flying higher today, up 7.4% in the last 24 hours as of 3:57 p.m. ET. The jump comes as the S&P 500 jumped 1.5% and the Nasdaq-100 jumped 1.7% on the day.
Federal Reserve Chairman Jerome Powell spoke at the Jackson Hole symposium this morning. While he painted a somewhat mixed picture, he indicated rate cuts would be coming. This sent XRP and other more speculative investments higher.
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Fed rate cut sent XRP soaring
Powell’s speech showed that the Fed’s decision of whether to begin cutting rates is not an easy one. There are signals of both a slowing economy and heating inflation — it’s not often that you find both happening at the same time. Still, Powell said that overall the economy is showing resilience and that inflation may not be enough of a concern to hold off on further cuts. While he didn’t confirm that the Fed would cut rates in September, he seemed to signal that it would be the case.
Image source: Getty Images.
Lowered rates tend to lead to investments in riskier assets and vice versa. While XRP and crypto have come a long way in how they are viewed by investors, they are definitely still considered more risky than equities, which in turn are considered riskier than bonds or fixed income investments. News that cuts are likely was enough to send XRP higher.
XRP has a massive valuation
I still believe that XRP is overvalued, however. It seems to me that the main value thesis is misunderstood by many investors and that a lot of its current $180 billion market cap is based on pure speculation. 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.
