Why XRP Is Sinking Today

XRP (CRYPTO: XRP) is moving lower in Tuesday's trading. The cryptocurrency's token price was down 4.2% over the previous 24 hours of trading as of 10:15 a.m. ET. Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) were down 1.7% and 3.2%, respectively, over the same stretch.

XRP is once again seeing significant pricing movement in conjunction with political catalysts -- although this time, it's in a bearish direction. The token is getting hit with significant sell-offs on the heels of a recent controversy surrounding Argentine President Javier Milei.

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XRP sinks as Milei scandal rocks the crypto market

Last Friday, President Milei published a message that seemed to endorse Libra -- a new cryptocurrency that he said would help encourage "economic growth by funding small businesses and start-ups."

Following Milei's message, the Libra token saw a massive influx of buying action that caused its market capitalization to skyrocket. Soon after, the cryptocurrency's largest token holders moved to sell most or all of their holdings -- prompting the token price to crash again. This dynamic is known as a "rug pull" -- and the recent controversy surrounding Milei and Libra has coincided with an increase in bearish sentiment surrounding XRP and other cryptocurrencies.

What comes next for XRP?

Positive political catalysts have likely been the biggest factor behind XRP's explosive valuation rise. Even with a recent pullback, the cryptocurrency's token price is up roughly 369% over the last six months.

Expectations that the new, Trump-era Securities and Exchange Commission (SEC) will drop a long-standing securities violations case against XRP's creator or allow the token to be included as part of exchange-traded funds (ETFs) that trade on major public exchanges have powered huge gains. Reports that President Trump and his crypto advisory team are considering XRP for inclusion in a U.S. digital assets reserve have also driven bullish momentum.

While these positive catalysts are still on the table, the recent issues surrounding Milei and the Libra token highlight a range of risk factors that can accompany political figures trying to make waves in the crypto world.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.