Cryptocurrencies Pull Back Ahead of Fed Meeting as Bitcoin (BTC) Trades Around $104k

Cryptocurrencies pulled back after a big run yesterday and as the Federal Reserve sets to conclude its final meeting of the year

Cryptocurrency prices pulled back slightly on Wednesday morning, as traders awaited the conclusion of the Federal Reserve's final meeting of the year and anticipated further interest rate cuts.

Bitcoin was trading at around $104,170 at 11:53 a.m. ET.

The world's third-largest cryptocurrency, XRP, saw its price decline by over 5% since late Tuesday afternoon.

Meme tokens Dogecoin and Shiba Inu also faced losses, with their prices trading down 4.3% and 4.6%, respectively.

Both tokens had a slight uptick in the morning, but quickly reversed course.

Cryptocurrency prices have surged this week, especially following President-elect Donald Trump's statement that he would like to create a strategic Bitcoin reserve, similar to the country's oil reserve.

A strategic reserve involves the government stockpiling a specific resource, such as a commodity, which can then be used to influence supply or be drawn upon during emergencies.

While the government currently has about 200,000 bitcoins, valued at around $21 billion, that could be used to launch a strategic reserve, it is still unclear how such a reserve would operate.

Other events, such as MicroStrategy joining the Nasdaq 100 index and Trump's policies, have also pushed the crypto past $107,000.

However, traders may have locked in some gains earlier today in anticipation of the Fed concluding its last meeting of the year.

Heading into the meeting, nearly all investors expected the Fed to lower interest rates by 25 basis points.

But there is likely more focus on the Fed's messaging, which could turn hawkish considering the labor market is still strong, inflation is still above the Fed's preferred 2% target, and Trump policies like tariffs could stoke inflation.

This may put further rate cuts next year at risk, and Bitcoin along with crypto in general have largely moved higher on news of such cuts.

In more token-specific news, Ripple, the company behind XRP, launched its highly anticipated stablecoin RLUSD this week, which is pegged to the U.S. dollar.

"Each RLUSD token is fully backed by U.S. dollar deposits, U.S. government bonds, and cash equivalents -- designed to ensure its stability, reliability, and liquidity," Ripple said earlier this week.

XRP price data by YCharts.

RLUSD can be used on either the Ethereum blockchain or the XRP ledger.

Since it will generate more traffic on the XRP ledger, investors also purchased XRP tokens earlier this week in anticipation of the stablecoin, according to Fortune.

The price of XRP went up yesterday but has struggled today along with the broader sector.

Much of what's driving movement in the crypto sector today appears to be related to the macro environment. Many believe Bitcoin is a hedge against inflation. However, the broader sector has largely performed like growth stocks, performing better in risk-on environments and worse in the face of rising interest rates and inflation. That's why the trajectory of interest rates next year will likely impact most cryptocurrencies.

XRP is one of the few tokens I own, and I think it has strong potential due to its fixed supply and efficient network. Its ties to Ripple and RLUSD may also prove bullish.

I currently have no interest in Dogecoin and Shiba Inu because they lack utility and don't yet have any ability to hedge inflation. Most altcoins are extremely volatile, so you shouldn't invest too heavily in any individual token.