Altcoin
How do the likes of XRP, DOGE, Cardano fare against UNI, SUSHI, AAVE as investment options
Posted:
| Last updated: January 30th, 2024
In our previous two articles, we individually analyzed the state of “old coins” (Cardano, Dogecoin, XRP) and DeFi tokens (Uniswap, Sushiswap, and AAVE). In this article, we will draw parallels and look at which category is a safer haven for investors to park their funds.
The market, at this stage, is not necessarily keen on how altcoins are performing. Most eyes are on Bitcoin and Ethereum – the two biggest cryptocurrencies. After weeks of consolidation in the lower $30k range, BTC was finally trading in the $40k range at press time. Ethereum, on the other hand, managed to climb above $2k and was valued at $2302, at the time of writing.
The right time to act
Traditionally, alts have pumped whenever BTC and ETH have had good days. Conversely, they’ve entered their ‘winter’ mode whenever the value of these major cryptos has dunked. Ergo, to relish the “harder” pumps in the coming weeks, this is the right time for investors to act.
UNI needs to lead the way
Old coins, arguably, share a higher correlation with Bitcoin. In fact, at the time of writing, the correlations of ADA, DOGE, and XRP with the market’s king coin stood at 0.90, 0.86, and 0.67, respectively. Now, if Bitcoin continues to rally, these old coins would most definitely benefit from it. The DeFi market, on the other hand, by and large, depends on how Uniswap performs.
Thus, like a true leader, UNI needs to lead the way for AAVE and SUSHI.
DeFi is the clear winner
Most of the on-chain metrics of the coins belonging to both categories were relatively in a healthy state. However, if the intensity of healthiness is to be compared, DeFi tokens seem to have an upper hand. The Sharpe ratio of the DeFi tokens (AAVE: 3.08, SUSHI: 1.03, UNI: 0.82) outpaced the old coins category by a fair extent (DOGE: -3.31, XRP: 0.36, ADA: 1.06).
Hence, in terms of risk-adjusted returns, the DeFi category is the clear winner.
Old coins have been there in the market for more time, when compared to these DeFi tokens. Hence, it is not surprising that all the three among DOGE, XRP, and ADA (1.7%, 2.56%, and 1.83% respectively) have an upper hand in market dominance when compared to their UNI, SUSHI, and AAVE counterparts (0.7%, 0.06%, 0.24% respectively).
However, DeFi tokens have been roaring quite loudly lately and AAVE, UNI, and SUSHI, in specific, have been leading the pack. Hence, drawing parallels based on dominance would not really be fair.
Overall picture
The volume and the development activity for altcoins from both categories seemed to project a chaotic picture. Nonetheless, keeping their most recent movements in mind, DeFi tokens have cumulatively fared better in development activity while the volume of old coins has been better.
Looking at the current state of the metrics, investing in DeFi tokens for the short term (a few months) seems to be a plausible option and sticking to the market’s old coins (barring DOGE) for the long term (a few years), makes better sense.
