Cryptocurrencies have moved higher in the last few days after reaching new lows in several months. XRP, for example, fell to the lowest point in more than 2 years when it reached $0.135 per coin on March 16.
Now that we are on March 21st, the“Forecast risks are overwhelmingly on the downside and depend crucially on how governments respond.” main question is whether the crypto market will keep falling.
At the time of writing, digital assets experienced a recovery from the last weeks. Some currencies were able to grow above 20% in just a few hours. XRP remains close to $0.15. XRP is expected to follow the trend of the cryptocurrency market.
However, there is no clear direction where digital assets are currently moving. It may be necessary to wait a few more weeks before understanding whether it is time for a recovery in the crypto market or not.
The Coronavirus outbreak has damaged the entire world economy and the predictions are not so positive. Analysts consider that this could be the worst financial crisis since 1929. This is why central banks are already taking all the necessary measures to stabilize the economy.
According to a report released by IHS Markit the response of the governments is going to be a key factor.
On the matter, they reported:
“Forecast risks are overwhelmingly on the downside and depend crucially on how governments respond.”
As the economy is going to be harmed, XRP is also expected to be affected. Take into consideration that many companies are shutting down and workers being laid off. If this continues, many corridors serviced by Ripple may reduce their volumes.
Nonetheless, XRP would be following the movements of the crypto market. That means it would work independently from the number of transfers made by financial companies using Ripple or XRP.
Emerging Markets and… Lack of Dollars?
During the last week, emerging markets have been severely affected. The currencies of these countries massively devaluated due to the current financial crisis. Poland, Hungary, Mexico, Brazil, and many other countries experienced massive devaluations.
Indeed, it is worth mentioning that the British Pound (GBP) was also affected by the current expansion of the Coronavirus. The currency that was once a store of value for the world, reached its lowest point in 35 years.
What is happening is related to a de-risk strategy of investors and the policies central banks are taking. In order to reduce the negative effects of Coronavirus on the economy, central banks announced different stimulus plans. In this way, they are planning to inject massive amounts of local fiat currency in the economy.
Furthermore, these countries are also going to be demanding USD in the short term. The recent plan of the FED to inject $700 billion into the economy may not be enough to meet the world’s demand for USD.
This has clearly a negative effect on the vale of their currencies. We also need to add that investors are moving from risk to safe assets. That means it is not a good time to invest in EM, at least in the short term.
Now, it will be interesting to see whether Bitcoin and virtual currencies remain traded in tandem with traditional markets. In the last weeks, the correlation between crypto and financial markets reached a new peak. On Friday, stocks closed positively, but many consider this is just short-term relief.
Virtual currencies followed a similar trend on Friday. Investors are now waiting to see whether it will be possible for them to keep growing on Monday. This will depend on whether investors will keep moving out from risk assets to other safer investments or cash.
XRP is being involved in a difficult situation as all the cryptocurrency market. The whole world is living difficult moments and financial markets are showing a de-risking strategy. Investors prefer to be far from risk assets and move towards more secure investment tools.
XRP price is expected to follow the general trend of the crypto market. For the moment, we keep waiting for a clear trend that would tell us whether to look higher or lower. Take into account it is certainly difficult, if not impossible to make price predictions for virtual currencies.