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Bitcoin (BTC) vs. Ripple (XRP): Which is the Better Store of Value?

Dec 06, 2018



Bitcoin (BTC) vs. Ripple (XRP) in the Recent Crypto Sell-Off

  • The first and second-largest cryptocurrencies by market capitalization, Bitcoin (BTC) and Ripple (XRP), respectively, are our focus in today as we discuss the possibility that XRP may be a better store of value than BTC 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 USD$93.8bn, falling 44.67% to USD$116.2bn. In that period, the price of BTC is down 36.52% while the price of XRP is down 31.61%.
  • The chart below depicts daily price changes of BTC and XRP since November 14th:



Bitcoin (BTC) vs. Ripple (XRP): Comparing Daily Returns and Volatility

  • As indicated by the total price return since November 14th and in the ‘Daily Price Change’ chart above, XRP appears to be a better store of value than BTC during periods of high volatility.
  • Since November 14th, XRP has outperformed BTC in 59% of trading days. 
  • BTC has fallen in excess of  5% in 8 trading days since November 14th, while XRP has only observed 5 declines greater than 5% since November 14th. Additionally, BTC fell more than 10% in two separate trading sessions during that period while XRP observed zero daily price declines of that magnitude.  
  • It is interesting to note, however, that on days where BTC is positive, XRP underperformed the BTC in 66.67% trading sessions since November 14th.
  • The chart below depicts total market capitalization of BTC and XRP over the last two years while illustrating spread between the two:



Bitcoin (BTC) vs. Ripple (XRP): The Final Verdict

  • As highlighted by the chart above, XRP market capitalization is quietly approaching that of BTC’s with the spread sitting at USD$51.7bn as of yesterday’s close. This is the narrowest spread between the two cryptocurrencies’ market capitalization since September 2017, prior to cryptocurrencies gaining mainstream traction.   
  • We here at Quantamize believe that XRP’s outperformance during volatile crypto markets can be attributed to the somewhat centralized nature of XRP.
  • Upon launching XRP in 2012, Ripple Labs placed 55bn XRP tokens in a cryptographically-secured escrow account that allows Ripple Labs to sell up to 1bn XRP tokens each month.  
  • Because Ripple Labs maintains control over the floating supply of XRP tokens, the company is able to soften the blow of broader market downturns by tightening the supply of available XRP tokens. This same concept can be applied to attribute XRP’s underperformance of BTC during bullish cryptocurrency markets. During market upturns, Ripple Labs may be more liberal in the availability of XRP tokens to take advantage of high demand and to realize fiat profits. An uptick in the available supply of XRP tokens during broader market upturns would effectively cause XRP to underperform other cryptocurrencies, all else being equal.