Water seeks its own level, and so does money. When cash becomes plentiful in the financial system, scarce digital assets such as Bitcoin (BTC 0.47%) and XRP (XRP 4.68%) often move sharply higher.
Looking toward 2026, there are five macroeconomic forces that appear ready to remove several roadblocks that have held crypto back during the past two years. XRP and Bitcoin are likely to go higher as a result. Here's why each matters.
1. Liquidity is rising again
Think of liquidity as the total pool of spendable cash in the global economy. When central banks add money to their respective national financial systems, usually by enlarging their balance sheets, investors have more capital to deploy, and riskier assets like major cryptocurrencies benefit first.
And since mid-2024, the total combined assets of the U.S. Federal Reserve, the European Central Bank, and the Bank of Japan have ticked higher for multiple quarters in a row.
During the last comparable upswing, from March 2020 to April 2021, Bitcoin leapt 500%, while XRP surged 483%.
So if major central banks keep refilling the punch bowl, history suggests another party for crypto prices, assuming nothing spoils the fun.
Image source: Getty Images.
2. The Fed is lining up to cut rates
Interest rates set the cost of borrowing money from central banks. Lower borrowing costs make cash cheaper and thus push investors to seek higher-return alternatives to government bonds, including leading digital assets like Bitcoin and XRP.
The Fed is now widely anticipated to trim its benchmark interest rate by mid-2026, which implies at least a couple of interest rate cuts in the very near future. In 2019, when the Fed cut rates by almost 1 percentage point, Bitcoin rose 120% in five months, and XRP climbed 17%.
That exact performance probably won't be replicated this time around, assuming things proceed as expected. But it will still likely be bullish for these coins.
3. A weaker dollar opens the door for foreign buyers
The U.S. Dollar Index is down roughly 8% so far in 2025 as worries over trade tensions and federal deficits mount.
A weaker dollar means that global investors need fewer units of their local currency to buy dollar-denominated Bitcoin or XRP, which could have the effect of juicing demand.
In 2017, a similar dollar slide that lasted through the start of 2018 preceded a jump in Bitcoin's market cap by a multiple of 13.5, and pushed XRP to rise by a shocking multiple of 34.6. As long as tariffs remain a topic of conversation for the U.S. economy, there could be a tailwind in play here.
4. Bond yields are drifting lower
Government bond yields represent the safest return for investors.
The 10-year U.S. Treasury yield has fallen from 4.7% in January 2025 to near 4.3% today. When safe yields drop, the gap between bonds and non-yielding assets such as crypto narrows, making coins more appealing in comparison.
After yields slid in late 2018 until shortly after the start of their rapid climb back up in October 2021, Bitcoin's price rose by 572%, and XRP's followed, climbing 84% in the tail end of the period.
5. Real incomes are climbing
When people have more disposable income, they invest more, and when they have invested in safe assets sufficiently, they move on to investing in riskier ones like Bitcoin or XRP.
Paychecks are stretching a bit further after accounting for inflation recently; average hourly earnings in the U.S. rose 1.4% from March 2024 to March 2025.
During the economic stimulus of the 2020 to 2021 period, fresh cash on the sidelines helped power Bitcoin's rise. There's no similarly strong stimulus this time around, but that doesn't change the fact that investors with deeper pockets are more likely to devote some of their money to cryptocurrencies like Bitcoin or XRP.
