Thus far in 2025, investors have been on a global hunt for assets that central banks cannot print.  Five parallel concerns appear to be driving this trend:

1. Core inflation remains above central-bank targets in nearly every country except for China and Switzerland.
2. Core inflation rates are rising in nearly every country.
3. Despite generally above-target and rising core inflation, nearly every central bank in the world, outside of Brazil and Japan, is lowering rates anyway. In Japan’s case, it should be noted that policy rates are far below the rate of inflation.
4. Many governments are running large budget deficits despite having low rates of unemployment (8% of GDP in China, 7.1% in Brazil, 5.5% in France, 4.5% in the U.K. and 6.3% in the U.S.)  Germany and Japan have smaller deficits but new leadership in the Bundestag and Diet are moving both countries towards a loosening of fiscal policy.  In Japan’s case, the primary deficit (not including interest payments) is already 3% of GDP and the total debt-to-GDP ratio adds up to over 200%.
5. Irrespective of the type of government (one party, two parties, or multiple parties) nobody appears to be inclined to explain to the public that large deficits cannot continue endlessly, and that eventually spending will have to be cut or taxes will have to be raised.

This macroeconomic context has sent the prices of precious metals like gold, silver and platinum soaring (see our related article here) and crypto assets are not far behind.  SOL and XRP have been the biggest outperformers over the past few years while BTC and ETH are also trading close to record highs (Figure 2).

For many years BTC enjoyed the first-mover advantage among crypto assets, having been launched three years before XRP, six years before ETH and over a decade before SOL.  While BTC still dominates the crypto space in terms of market cap, it is more akin to a form of digital gold, primarily used as an inflation-proof store of value, albeit a volatile one.  By contrast, ETH, SOL and XRP have real use cases such as developing decentralized finance (Defi) apps and smart contracts for ETH and SOL as well as cross-border payments in the case of XRP. Moreover, SOL and XRP have much faster moving blockchains that can handle many times BTC’s transaction volume.

Historically, BTC averaged around three to four transactions per second on its blockchain. Its busiest days never recorded much above 10 transactions per second (Figure 3).

Historically, BTC prices have often followed the transaction volume on the bitcoin blockchain, which can be seen as a measure of the size of its user-base. Since it’s difficult for BTC to have more than about 600,000 transactions per day, this appears to be limiting growth in bitcoin’s user-base and perhaps hindering upside price movement (Figure 4).

The reason for this is closely linked to its computational power, and energy-intensive proof-of-work system of validating trades on the bitcoin blockchain. Currently, it takes over 142 trillion calculations to mine a new BTC (Figure 4) and the cost of transacting on the bitcoin blockchain, as measured by miners’ revenue per transaction, has been highly variable (Figure 5).

It should be noted as well that BTC prices have often fallen sharply following spikes in miners’ revenue per transaction.  Bitcoin’s four major bear markets, which led to price declines of 70-93% each time, were all preceded by sharp spikes in the amount of revenue that miners required for validating trades on the bitcoin blockchain. Those who are bullish on BTC at current prices might be encouraged to see that bitcoin miners’ revenue per transaction is currently far from a record high.

This is less of a problem for other crypto assets. Ether appears to handle about 30 transactions per second with its less computationally and energy-intensive proof-of-stake means of validating trades. That’s four times as much as BTC. Still it pales in comparison to XRP and SOL whose blockchains appear to be able to handle a sustained pace of 1,500 and 3,000 transactions per second (Figure 7).

The pace of transaction on the blockchain corresponds inversely to the “finality time” – the number of minutes after a trade is put into the system until a transaction is considered irreversible and permanently recorded on the blockchain. On bitcoin’s blockchain, it can take roughly an hour to complete a trade compared to about 13 minutes on the Ethereum blockchain or a few seconds on Ripple for XRP or Solana for SOL (Figure 8). As such, only crypto assets like XRP and SOL can handle the volume of transactions needed by financial markets.

As of early October, 30-day ATM options on bitcoin futures were trading at around 30%-35% implied volatility while those on ETH were nearly 2x as expensive at 60%-65% implied volatility. (Figure 9).

The gap between BTC and ETH option implied volatility corresponds closely to the recent gap in realized volatility observed over the past few months. Meanwhile, XRP and SOL’s realized volatility has been generally similar to or somewhat higher than ETH (Figure 10).

While BTC’s proof of work blockchain is much slower than the SOL’s proof of history or XRP’s set of trusted nodes which are used to validate transactions, bitcoin continues to exert a strong influence on the sector as witnessed by XRP’s, and especially ETH’s and SOL’s strong correlation to BTC (Figure 11).

Additionally, all of the crypto assets remain positively correlated to the tech-dominated Nasdaq 100 index, (Figure 12) whose options are trading near record low implied volatility.  As such, any spike in equity index implied volatility also poses upside risks to implied volatility on crypto assets.

The launch of crypto options allows for greater flexibility in hedging positions, managing risk or expressing directional views with limited capital exposure. Overall, crypto currencies remain vulnerable to any extended correction in the equity markets, which tend to be more volatile on the way down than on the way up, and the same appears to be true for crypto assets. If equities continue to rally, however, crypto assets could follow them higher and those with faster-moving blockchains and use cases beyond being stores of value could continue to outperform.