Better Buy in 2025: XRP or Bitcoin?
Wesley ParkWednesday, Dec 25, 2024 5:57 am ET
9min readAs we approach 2025, investors are wondering which cryptocurrency will be the better buy: XRP or Bitcoin? Both have unique features and use cases, but let's dive into their historical performance, risk-adjusted returns, and other factors to help you make an informed decision.
Market Capitalization and Trading Volumes
Historically, Bitcoin has maintained a significantly higher market capitalization and trading volume than XRP. As of November 2, 2024, Bitcoin's market cap was around $540 billion, compared to XRP's $25 billion. Bitcoin's trading volume was approximately $30 billion, while XRP's was around $2 billion. However, XRP's lower market cap and trading volume may present an opportunity for higher growth potential.
Historical and Projected Returns on Investment
Based on the provided data, XRP-USD has underperformed BTC-USD in recent years. As of Nov 2, 2024, XRP-USD's YTD return was -16.60% compared to BTC-USD's 64.40%. The 1Y return for XRP-USD was -15.43% vs. BTC-USD's 98.87%. However, XRP-USD's 5Y return (Ann) was 11.98%, slightly higher than BTC-USD's 49.72%. For better insights, consider consulting a financial advisor or conducting further research.
Volatility and Risk-Adjusted Returns
In 2025, investors seeking a better buy between XRP and Bitcoin should consider their volatility and risk-adjusted returns. XRP, with a daily standard deviation of 51.90% and a maximum drawdown of -95.87%, exhibits higher volatility than Bitcoin, which has a daily standard deviation of 43.00% and a maximum drawdown of -93.07%. However, XRP's Sharpe ratio of -0.09 indicates lower risk-adjusted returns compared to Bitcoin's Sharpe ratio of 1.05. Additionally, XRP's Sortino ratio of 0.36 is lower than Bitcoin's 1.74, further emphasizing Bitcoin's superior risk-adjusted performance.
Correlation with Other Assets in a Portfolio
The choice between XRP and Bitcoin as a better buy depends on your investment goals and risk tolerance. Both have unique characteristics that make them attractive. XRP, with its focus on cross-border payments and lower volatility, offers a more stable option, while Bitcoin, with its decentralized nature and higher volatility, provides greater potential for growth. However, their correlation with other assets in a portfolio is crucial for risk-adjusted returns and diversification benefits. According to data from PortfoliosLab, XRP and Bitcoin have a moderate correlation of 0.67, suggesting they can provide some diversification benefits.
In conclusion, the better buy in 2025 between XRP and Bitcoin depends on your investment goals and risk tolerance. While both have unique advantages, Bitcoin's superior risk-adjusted performance and higher growth potential may make it the better choice for investors seeking higher returns. However, XRP's lower volatility and focus on cross-border payments may appeal to more risk-averse investors. Ultimately, the decision will depend on your individual investment goals and risk tolerance.
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