The crypto market has taken a steep plunge this quarter. Most of the big names, including Bitcoin, Ethereum, and Solana, have lost quite a bit of value since October.
XRP (XRP +6.98%), a cryptocurrency launched by blockchain payments company Ripple, hasn’t been immune to the downturn. In fact, its decline started even earlier, in July. But if you zoom out, you can see that XRP has still been a winning investment recently.
XRP is up 260% over the last five years (as of Nov. 30). To put it another way, if you had invested $100 in XRP five years ago, your position would now be worth $360. A $100 investment in the S&P 500, on the other hand, would be worth $204, so XRP has outperformed the stock market.
While cryptocurrencies can sometimes deliver market-beating returns, there are a few important caveats. They’re notoriously volatile and can go through extended bear periods. XRP is the perfect example. It may have better five-year returns than the S&P 500, but that’s only because of a massive rally following the 2024 election of Donald Trump as president.
If you’re going to invest in XRP or other cryptocurrencies, proper risk management is a must. Keep your position small relative to your investment portfolio as a whole — up to 5% at most. Be prepared for the possibility that your investment could be in the red for months or years. And if your crypto holdings go on a good run, you may want to sell a portion to lock in some profits, considering how even popular cryptocurrencies can go through significant drops at a moment’s notice.
