Lately, the crypto markets have been under a lot of pressure, as the COVID-19 crisis is taking over the world.
As reported on CoinGape yesterday, quick recovery in many of these altcoins is now beginning to shrink the dominance of Bitcoin. However, Grayscale’s quarterly report suggests that the interest in other cryptocurrencies has been subsiding considerably, expect for Ethereum.
The demand for Ethereum has seen a 260% from year-to-year in the first quarter of 2020 compared to 2019. The report states,
In 1Q20, demand for Grayscale Products ex Bitcoin Trust grew to $114.8 million, up more than 260% from $31.6 million in 4Q19.
This was almost entirely driven by inflows to Grayscale Ethereum Trust ($110.0 million), bringing T12M inflows for Grayscale Products ex Bitcoin Trust to $250.1 million.
Moreover, Ethereum also dominates over 95% of new inflows to the Trust fund excluding Bitcoin. Over the last year, other assets (excluding Bitcoin) comprised only 17.7% of the total investment.
With institutional investment comprising of more than 88% of the Grayscale’s fund growth, the trend predicts a lack of interest in other cryptocurrenices like Litecoin, XRP, Bitcoin [BCH], Ethereum Classic [ETC], Zcash, Zen, and Stellar [XLM] listed on Grayscale.
Correlations within Crypto Markets
According to another report from September 2019, there has been a strong correlation between these markets. While we witnessed a drop in the magnitude of this correlation in the second half of 2019, the numbers are going back up again.
The correlation between Bitcoin with Litecoin (red) and Ethereum (blue) is 0.88, the strongest levels of correlations in the markets.
XRP which remains to be the third-largest cryptocurrency with respect to market capitalization. However, there is a huge $11.2 billion difference between Ethereum and XRP.
Moreover, as central banks around the world (like China) are looking to work on their own version of a cryptocurrency or digital currency (stablecoin), the value proposition for XRP has seen a slowdown in the past year as well.
For diversification within crypto, investors will look to invest in weakly correlated assets more than strong correlations. Chainlink [LINK], Tezos, EOS and exchange backed tokens like Binance [BNB] chain, LEO, Huobi [HT] Token and so on have seen a rather steady growth compared to the other cryptocurrenices in the market. Nevertheless, these projects mentioned above are not currently listed on Grayscale.
Which cryptocurrenices are added in your portfolio? Please share your thoughts with us.