- The first and second-largest cryptocurrencies by market capitalization,
BTCUSD
and
XRPUSD
, respectively, are our focus in today as we discuss the possibility that
XRPUSD
may be a better store of value than
BTCUSD
amid volatile cryptocurrency market conditions.
- A large sell-off of digital assets began on November 14th, 2018 when total cryptocurrency market capitalization shed USD$27bn in a 24-hour period. Since then, total cryptocurrency market capitalization has given up roughly USD$100bn, falling 47.62% to USD$110.8bn. In that period, the price of
BTCUSD
is down 44.98% while the price of
XRPUSD
is down 39.41%.
- An analysis of daily returns for
BTCUSD
and
XRPUSD
since November 14th, 2018 reveals that
XRPUSD
appears to be a better store of value than
BTCUSD
during periods of high volatility.
- Since November 14th,
XRPUSD
has outperformed
BTCUSD
in 57% of trading days.
-
BTCUSD
has fallen in excess of 5% in 9 trading days since November 14th, while
XRPUSD
has only observed 6 declines greater than 5% since November 14th. Additionally,
BTCUSD
fell more than 10% in 2 separate trading sessions during that period while
XRPUSD
observed 0 daily price declines of that magnitude.
- It is interesting to note, however, that on days where
BTCUSD
is positive,
XRPUSD
underperformed
BTCUSD
in 69.23% trading sessions since November 14th.
- We believe that
XRPUSD
outperformance during volatile crypto markets can be attributed to the somewhat centralized nature of
XRPUSD
. Upon launching
XRPUSD
in 2012, Ripple Labs placed 55bn
XRPUSD
tokens in a cryptographically-secured escrow account that allows Ripple Labs to sell up to 1bn
XRPUSD
tokens each month.
- Because Ripple Labs maintains control over the floating supply of
XRPUSD
tokens, the company is able to soften the blow of broader market downturns by tightening the supply of available
XRPUSD
tokens. This same concept can be applied to attribute
XRPUSD
underperformance of
BTCUSD
during bullish cryptocurrency markets. During market upturns, Ripple Labs may be more liberal in the availability of
XRPUSD
tokens to take advantage of high demand and to realize fiat profits. An uptick in the available supply of
XRPUSD
tokens during broader market upturns would effectively cause
XRPUSD
to underperform other cryptocurrencies, all else being equal.