Inflation
People walking through a busy clothes shop, motion blur

The Ripple price is still struggling. The XRP is trading at $0.8660, which is about 55% below the highest point this year. This decline brings its total market capitalization to more than $39.9 billion, making it the 7th biggest cryptocurrency in the world. 

Inflation data ahead

Ripple price is struggling even as other cryptocurrencies like Bitcoin and Ether bounce back. Bitcoin is up by more than 5% today after El Salvador became the first country to accept the coin as a legal tender. This move means that people can now start paying taxes and shopping using the currency.

However, in reality, this is not a big deal. Furthermore, El Salvador is a small country of more than 6 million people and a GDP of less than $30 billion. Also, many businesses are expected to continue relying on the US dollar, which is more stable than Bitcoin. Most importantly, it is unlikely that other countries will move to embrace the coin.

Another catalyst for the XRP is the upcoming inflation data from the United States. The Statistics Bureau will publish these numbers on Thursday. Analysts expect that the headline consumer price index (CPI) rose by 4.7% in May after rising by 4.2% in the previous month. They also see core CPI rising by more than 3% in May.

Inflation has jumped mostly because of the rising demand for commodities. This, in turn, has pushed the prices of other items relatively higher. For example, lumber prices have quadrupled in the past 12 months, pushing the average house price up by the fastest rate since 2005. 

Prices have also risen because of the ongoing global shortage of items. For example, many automakers have reported shortages in semiconductors, which has pushed the cost of second-hand cars. 

And now, some analysts expect the US inflation to keep surging ahead. In an interview today, Roger Bootle of Capital Economics said that he was fearing for superinflation. You can watch the interview below.

Inflation and Ripple

So, what is the intersection between Ripple price and inflation? The answer is in monetary policy. For starters, the Federal Reserve has the dual mandate of maintaining prices stable and unemployment low. We have some evidence that unemployment is dropping. On Friday, data showed that the unemployment rate fell from 6.1% to 5.8% in May. This is still higher than the pre-pandemic low of 3.8% but it is still progress.

At the same time, there is evidence that there is inflation. If analysts are right, it means that the Fed will likely start thinking about tightening.

In theory, Ripple and other cryptocurrency prices are typically risk assets. As such, when the Fed tightens, investors shift their funds from these assets to the relatively safer ones.

The idea is this. If Bitcoin and Ripple prices surged in an era of easy money, they will then recoil when this era runs out. There are some truths in that. However, as I wrote before, in the longer term, the impact of high rates on cryptocurrencies will be minimal. I also warned that the Fed will likely not be in a position to hike rates in the future.

Ripple price forecast

Ripple price
Ripple price chart

The daily chart is not looking good. As you can see, the coin made a double-top pattern at $1 whose neckline was at $0.77880. Yesterday, the price managed to test this neckline. Further, the price seems to be forming what looks like a bearish flag pattern, which is also a bearish signal.

The 25-day and 50-day moving average have formed a bearish crossover pattern. Therefore, there is a possibility of a bearish breakout soon. If this happens, the next key level to watch will be $0.5, which is about 40% from the current level. This is in line with my previous prediction on XRP prices.

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