Updated Jul 15, 2026, 3:00 p.m. Published Jul 15, 2026, 2:58 p.m.
5 min read
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Hi readers,
Welcome to our institutional newsletter, Crypto Long & Short. This week:
- As the crypto market expands, solana has historically been a better portfolio diversifier than ether, despite volatility, writes Denny Galindo.
- Top headlines institutions should pay attention to by Francisco Rodrigues.
- “Robinhood Chain’s $690M/day DEX debut is 99.5% Uniswap” in Chart of the Week.
Thanks for joining us!
To ETH or not to ETH — is SOL the better diversifier?
By Denny Galindo, CFA®, executive director, Global Investment Office, Morgan Stanley Wealth Management
Bitcoin's spot exchange-traded products (ETPs) have attracted more than $55 billion in inflows since their launch in January 2024, helping pave the way for the subsequent launch of Ether and SOL ETPs. With more cryptocurrency investment options now available, many investors are asking whether they should have digital asset exposure at all and, if so, whether they should own ether and/or SOL alongside bitcoin.
To evaluate the portfolio role of these assets, we focus on two questions: 1) how correlated are digital assets with other parts of a typical portfolio? and 2) what combination of bitcoin, ether and SOL has historically provided the greatest diversification benefit?*
Historically, bitcoin has exhibited relatively low correlations with traditional asset classes over full four-year crypto cycles. While those relationships have evolved as cryptocurrencies have become more integrated into financial markets through futures, exchange-traded funds (ETFs) and ETPs, bitcoin has generally maintained diversification characteristics distinct from many traditional assets.
The question becomes more complicated when investors move beyond bitcoin. Ether and SOL are generally less liquid and more volatile than bitcoin. Since the start of 2026, ether and SOL have exhibited volatility approximately 35% and 44% higher than bitcoin, respectively. Diversification within crypto therefore often increases volatility. Whether that improves diversification depends on correlations. A volatile asset moving in the same direction as the rest of the portfolio may reduce diversification benefits, while one moving differently may enhance them.
Historically, SOL has acted as a better diversifier than ether. Over the four years through April 2026, bitcoin's correlation with ether was 0.78. By contrast, SOL's correlation with bitcoin was 0.72. Thus, SOL was slightly less likely to move in the same direction as bitcoin each week. More importantly, when SOL did not move in the same direction as bitcoin, it was historically less likely than ether to move in the same direction as other parts of a traditional portfolio, such as equities. SOL's correlation with the S&P 500 Index was slightly lower than both bitcoin's and ether’s. If historical correlations are any guide, SOL might act as a better diversifier than ether.
Not all investors are motivated by diversification benefits. We see three reasons investors hold digital assets in their portfolios. Investors who view crypto as digital gold may continue to prefer bitcoin. Investors focused on blockchain adoption and financial disruption may prefer exposure to bitcoin, ether and SOL. Each of these technologies are disrupting different addressable markets. Investors primarily seeking diversification may want to consider either a bitcoin-only portfolio or a portfolio combining bitcoin and SOL.
We make no recommendation regarding whether investors should buy, sell or hold bitcoin, ether, SOL or any other asset. Historical relationships may not persist, and past diversification characteristics should not be viewed as indicators of future results. Still, as the digital asset ecosystem expands beyond bitcoin, investors may increasingly find that the more important question is not whether to diversify within crypto, but how.
*Diversification does not eliminate the risk of loss.
Over the past week the dominant theme in the cryptocurrency space was the deepening of the infrastructure underpinning it, as well as its further move into regulated banking and capital markets. Strategy, meanwhile, has moved ahead with its first material BTC sale.
- Circle secures final approval for a federally regulated trust bank: The U.S. Office of the Comptroller of the Currency’s (OCC) final approval places Circle National Trust under direct federal supervision, initially supporting custody for Circle and its affiliates, with scope to serve a limited number of regulated institutions later.
- Swift rolls out new blockchain ledger to bring 24/7 banking to 17 global giants: Swift is preparing live tests of a blockchain-based shared ledger with 17 banks, including Citi, HSBC, UBS and Wells Fargo, enabling 24/7 cross-border payments using tokenized deposits while retaining existing settlement and compliance controls.
- U.S. SEC to propose crypto rule as soon as this month to ease startups, fundraising: The U.S. Securities and Exchange Commission is preparing a broad crypto rule proposal covering fundraising and potential regulatory exemptions, a step that could reduce legal uncertainty for tokenized securities and other institutional onchain products.
- Strategy further breaks its HODL precedent with a 3,588-bitcoin sale: Strategy sold approximately $216 million of bitcoin to replenish dollar reserves used for preferred-stock dividends, demonstrating that its BTC holdings are now an active source of balance-sheet liquidity rather than a strictly untouchable reserve.
- Russia's largest bank plans crypto wallet launch as Moscow clears market path: Sberbank plans to add a crypto wallet and digital custody services to Sberbank Online and SberInvestments by December, pending implementation of Russia’s new digital-asset legislation.
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