A new Binance Research report highlights the correlation between various cryptocurrency ‘clusters’ – concluding that Ripple’s XRP token offers a ‘diversifying’ position for investors. At the same time, diversifying has not been the most successful strategy when it comes to reducing risk based on historical market performance.
XRP ‘Best Diversifying’
Binance Research released a report this past week detailing the correlation between types of cryptocurrencies.
It concludes that the largest cryptocurrencies such as Bitcoin and Ethereum exhibited the highest positive correlations or “clusters.” This positive correlation means that the prices of Bitcoin and Ethereum tend to follow the same market trends. As the prices tend to move together, investors are then exposed to similar gains and risks.
Ripple, on the other hand, showed less of a correlation with Bitcoin and Ethereum’s trends and was named “the best diversifier among digital assets with a market cap above $3 billion” in the report.