A new report published by Binance Research on April 26, 2019, shows that while Bitcoin (BTC), Ethereum (ETH), and other leading cryptocurrencies are strongly correlated in price action, Ripple’s XRP cryptocurrency has a relatively weak correlation. Thus, it is considered to be a suitable diversified investment.
Per the report, Binance’s research team investigated the connection between the 30 top cryptocurrencies from March 2018 to March 2019, and concluded that Bitcoin and Ethereum have the highest correlation to one another, while XRP has one of the lowest correlations to BTC.
The figure above shows the level of correlation each of the top 30 digital assets has on one another. As seen in the left 2 columns of the image, the majority of crypto assets have a high correlation with Bitcoin and Ethereum, ranging from 0.7 to 0.87.
However, XRP’s correlation with Bitcoin is just 0.53, and its correlation with Ethereum is just 0.61, which is very low compared with almost all other top 30 cryptocurrencies.
Therefore, the report labels XRP as suitable from the perspective of diversified investment.
What Is XRP Correlated With?
Although XRP has a low level of correlation with the top 30 cryptocurrencies, the crypto it’s most highly correlated with is Stellar (XLM), with a score of 0.73.
This is likely due to their functional similarities as cryptocurrencies serving the banking industry for the settlement of international remittances. Also, Stellar (XLM) is a fork of the XRP protocol and system.
All in all, investors looking to diversify their portfolio among the top cryptocurrencies are best to hold some XRP as a hedge to the overall crypto market.
Why do you think Ripple’s XRP has a low correlation with other leading cryptocurrencies? Is the Ripple company controlling XRP’s price to act in this way? Let us know what you think in the comment section below.