During the recent rally, while the top coins Bitcoin and Ethereum surged significantly, there were other altcoins that performed well in terms of both network growth and price. In particular, some of the best alts like Cardano and XRP offer a low investment option to market players.
This is different from other bigger players, Bitcoin and Ethereum and some other alts like Litecoin and BNB as well. Understanding your data based on metrics can indicate which of them is an appropriate investment.
High investment highs vs. low investment highs
Market participants in general are less concerned with price than ROI, network robustness, functionality, long-term growth, and risk associated with the asset. But who doesn’t like low-investment, high-yield options? In fact, the best low-value alternatives like Cardano and XRP offer a good entry point for new entrants to the space.
Cardano ranged to $ 2.9, while XRP scored $ 1.28 at time of writing. In contrast, some of the major alts like BNB and Litecoin were trading at prices much higher than ADA and XRP. At press time, Binance Coin was valued at $ 488.97 and Litecoin was trading at $ 212.54. On the back of Bitcoin’s recent rally, almost all of the major alts rallied, but the question remained whether alts under $ 5 gave better ROI than higher-valued alts.
A portfolio of altcoins
While an ideal portfolio would include both high-risk and low-risk assets, thinking of the same in terms of altcoins would largely require a similar setup. Now what if one had to have a mix of low-investment and high-investment assets in their portfolio? Well, imagine allocating the same amount of money to an alternative like Cardano and XRP (less than $ 5 / coin), such as that allocated to BNB and LTC, for example.
In that case, over the past three months, earnings would have skyrocketed thanks to some of the low alternative investments. If someone bought ADA at $ 1.4 and XRP at $ 0.72 a month ago, their ROI against USD would be 110.84% and 74.96% respectively. On the other hand, the monthly ROI for BNB was 45.76% and for LTC it stood at 54.20% at the time of publication. In addition, the low price of the alternatives below $ 5 also offers exponential growth and a return on investment compared to the higher value alternatives.
This meant that if the same amount of money was allocated to a high-value alternative like LTC or BNB, the ROIs generated would be much lower compared to Cardano and XRP. But ROIs are not everything, what about the associated risk? It is often said that the higher the profit, the higher the risk, but was it true?
Higher return on investment, higher risk?
Well not yet. The Sortino ratio measures the risk-adjusted return on an investment asset. For reference, consider Bitcoin, which had a Sortino ratio of 0.1181, while the same for Cardano was 0.1638 at the time of writing. Also, Sortino’s share of Litecoin at the time of writing, despite its 14% daily earnings, was much lower than ADA’s at 0.0617.
On the other hand, Binance Coin’s Sortino ratio was 0.0767 while the same for XRP was 0.0861. When looking at two similar investments, in this case altcoins, a rational investor would prefer the one with the highest Sortino ratio. That is because, the investment would obtain more returns per unit of the bad risk that it assumes.
Therefore, it is always better to have a balanced portfolio, even if it is an altcoin portfolio. It seems that in crypto-verse diversification is the key to success.
This is a machine translation of our English version.
Your opinion is important to us!