Ripple has always struck me and many other cryptocurrency advocates as the outlier. While most other altcoin asset embrace both the blockchain technology AND the decentralization ethos, Ripple proudly aligned itself with the big banks, and by doing so, with the Rothschild control mechanism.
Of course, most of this moral hesitancy is ignored due to the massive profitability and investing potential of this "banker cryptocurrency." Money does a lot of strange things to the human mind, like compromise one's personal values and integrity.
While I'm not suggesting that investing in Ripple is a morally corrupt endeavor, I think it's fair to say that most cryptocurrency advocates have at least been bothered with the implications of the big banker relationship.
But today, I have a much more important, and technical, issue to discuss:
Ripple and Bitcoin are Least Statistically Correlated!
I can't speak for every single cryptocurrency in the market. However, what I can say is that among several major cryptocurrency assets, I have found the least statistical correlation between Bitcoin and Ripple.
While other blockchain tokens share at least a mid-80% correlation with the Bitcoin price, with Ripple, its lifetime correlation with Bitcoin measures only 79%.
While this is still a strong correlation, comparatively, it's an unusual investing indicator. This is because, at certain points in time, Ripple does things that Bitcoin nor other cryptocurrency tokens do.
Going Deeper in the Rabbit Hole
When you break down the correlation by year, the situation becomes even more unusual.
Ripple appears to be developing a pattern where high correlation is consolidated with years of weak to no correlation. This consolidation is later resolved with a burst of strong correlation.
What this means moving forward is anyone's guess. Perhaps Ripple is one of few natural investing hedges against the Bitcoin price -- buy when Bitcoin is down, and sell when Bitcoin is high.
Either way, I wanted to let you all know before you decide to jump on board Ripple!
Wouldn't correlation mean the exact opposite, that it wouldn't make a good hedge?
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You are correct, but if Ripple continues to engage in patterns of weak to no correlation, it might act as a "natural" hedge.
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How did you gather the information to determine the percentage of time there has been correlation? Have you reviewed Stellar Lumen's correlation?
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Hey @bullishmoney! Interesting post. I've only been on Steemit for a couple days now and your article has struck me as one of the most informative so far. There isn't a lot of posts here which show some empirical evidence in their posts. Although it would have been nice to see citations. Keep it up! Got my follow :D
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Thank you, I appreciate that! The hard data comes from Coinmarketcap.com, although I'm sure you can find other sites with the same historical numbers; otherwise, everything else is my own work.
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Any edge we can get in these markets is a good thing! This anti-correlation can help for sure. thanks for the post.
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I have the same sentiment as @cryptofortuna
New on Steemit since yesterday and @bullishmoney is the first member I've found worth following. Thanks for the thoughtful material. You've got my votes.
Couple of questions here though. On your XRP - BTC correlation chart, the correlation between 2014-2017 have actually been much lower than the 79% average. However since 2017 the correlation has actually increased up to the 92.5% this year. Do you think this is coming from the rising general interest in crypto since last year?
Are you also suggesting that the correlation pattern might be cyclical? I am personally hoping that XRP can move to a more permanent state of low correlation with BTC but this is more due to the fundamental differences between the 2 coins rather than a cyclical pattern.
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Thank you so much; I'm very humbled and honored that you would say that; I'm trying very hard to deliver insightful or thought-provoking content, so your words affirm my effort! :)
To answer your first question, yes, I do think the correlation is stronger between XRP/BTC due to rising general interest in crypto. This occurred mostly in recent months. Prior to that, XRP was doing its own thing, as determined by the low correlation relative to the lifetime average.
Also yes, I'm suggesting it could be cyclical, but just as my own idea. I could be dead wrong about this. Unfortunately, I just don't have enough data to better determine the next piece of the puzzle. But it's just something to consider as you build your XRP portfolio.
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