Margin Trading

Binance Research Suggest XRP is Best Diversifier While BTC & ETH are Most Corelated

Binance’s latest research was based on various approaches to understanding crypto assets better. The research report suggests that the prices of Bitcoin and Ethereum move in accordance with each other while Ripple’s price movement is least correlated to any other crypto asset.

Binance research team made use of the cluster analysis, a well-known statistic technique which is used to classify various entities under one form of the comparison system. Binance applied this method on the top 30 cryptocurrencies to study their price movement and the correlation among them. The research paper is titled,  “Categorizing Cryptoassets: A Return-Driven cluster Analysis,”

What Does Binance Research Analysis Suggest

The research conducted by the Binance to see the correlation of prices among top-30 crypto assets gave some interesting results. As per the analysis based on weekly returns, the top cryptocurrency like Bitcoin and Ethereum show quite similar price trends and correlation. While. Ripple the only crypto asset in top 10 with over $3 billion in market cap shows quite a different price movement than the rest. Ripple also comes out to be the best diversifier among the compared crypto assets.

Binance in its research took all the Forks coin of Bitcoin under one cluster and few other assets under different effects. One such cluster was called Binance effect which included tokens such as Tezos and Dogecoin which are neither listed on Binance nor has any forked child.

The research also took into consideration the geographical effect on the price movement of different digital assets. For example, Qtum, Cardano, NEO and OmiseGo all are based in Asia and even the coin holders majorly belong to the same region. Binance also included privacy tokens such as Monero and Dash under one category.

The research concludes that the correlation in prices for large crypto assets are similar and the correlation is similar for assets working on the same consensus. For example, a Proof-Of-Work based digital asset has the same price movement when compared to non-Proof-of-work consensus obliging crypto assets.

Dogecoin, Tezos, and Ripple are least co-related to any other digital asset in terms of their pricing movement.