Cryptocurrencies pulled back after a sharp rise yesterday as the Federal Reserve is expected to end its final meeting of the year with a 25 basis point rate cut. Bitcoin was trading at about $104,170 as of 11:53 a.m. ET on Wednesday.

The price is now from XRP (XRP -22.38%)the world’s third largest cryptocurrency, was trading over 5% lower since yesterday afternoon. The meme tokens Dogecoin (DOGE -35.69%) And Shiba Inu (SHIB -28.95%) traded 4.3% and 4.6% lower, respectively.

Take a breather

Cryptocurrencies, and Bitcoin in particular, saw a surge this week after President-elect Donald Trump said he would like to create a strategic Bitcoin reserve like the country’s strategic oil reserve. A strategic reserve is the buildup of a specific resource, such as a raw material, that can be used to influence supply or be used in emergencies.

It’s still unclear how such a reserve would work, but the government currently has about 200,000 Bitcoins worth about $21 billion, which could be the starting point for a strategic reserve.

And Microstrategythe data company founded by Michael Saylor and the largest public holder of Bitcoin, has now joined Nasdaq 100 Index. These events pushed the cryptocurrency above $107,000 yesterday.

However, traders may have made some profits today in anticipation of the Fed concluding its final meeting of the year. At the start of the meeting, almost all investors expected the Fed to cut interest rates by 25 basis points.

However, the focus is likely to be more on the Fed’s messaging, which could become hawkish given that the job market is still strong, inflation is still above the Fed’s preferred 2% target and Trump’s actions like tariffs could fuel inflation. This could jeopardize further rate cuts next year, and Bitcoin and cryptocurrencies in general have largely risen on news of such cuts.

In more token-specific news, Ripple, the company behind XRP, launched its highly anticipated stablecoin RLUSD this week, tracking the US dollar. Earlier this week, Ripple said: “Each RLUSD token is fully backed by US dollar deposits, US treasuries and cash equivalents – designed to ensure its stability, reliability and liquidity.”

XRP price data from YCharts.

RLUSD can be used Ethereum Blockchain or the XRP ledger. Since this will create more traffic on the XRP ledger, investors also purchased XRP tokens earlier this week in anticipation of the stablecoin Assets. The price of XRP rose yesterday but is struggling today along with the entire sector.

Keep an eye on macro forces

Much of what is driving movement in the crypto sector today appears to be related to the macro environment. Many believe that Bitcoin is a hedge against inflation. However, the broader sector has largely performed like growth stocks, performing better in risk-on environments while underperforming in the face of rising interest rates and inflation. For this reason, interest rate trends will likely impact most cryptocurrencies next year.

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

I have no interest in Dogecoin and Shiba Inu at this time because they lack utility and have no way to hedge against inflation yet. Most altcoins are extremely volatile, so you should not invest too much in a single token.