This week, Denny Galindo from Morgan Stanley points out that as the cryptocurrency market grows, Solana has historically served as a more effective portfolio diversifier than Ether, despite its higher volatility.
By Denny Galindo |Edited by Alexandra LevisUpdated Jul 15, 2026, 3:00 p.m. Published Jul 15, 2026, 2:58 p.m. 5 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on SummaryShowYou are reading Crypto Long & Short, our weekly newsletter providing insights, news, and analysis for professional investors. Subscribe here to receive it every Wednesday.
Hello readers,
Welcome to our institutional newsletter, Crypto Long & Short. This week:
- Denny Galindo notes that as the crypto market grows, Solana has historically proven to be a superior portfolio diversifier compared to Ether, despite its volatility.
- Key headlines that institutions should monitor by Francisco Rodrigues.
- “Robinhood Chain’s $690M/day DEX debut is 99.5% Uniswap” featured in the Chart of the Week.
Thank you for joining us!
Is SOL a Superior Diversifier Compared to ETH?
By Denny Galindo, CFA®, executive director, Global Investment Office, Morgan Stanley Wealth Management
Since the introduction of Bitcoin spot exchange-traded products (ETPs) in January 2024, over $55 billion has flowed into these products, setting the stage for the subsequent launch of Ether and SOL ETPs. With a growing array of cryptocurrency investment options, many investors are contemplating whether they should invest in digital assets and, if so, whether to include Ether and/or SOL alongside Bitcoin.
To assess the role of these assets in a portfolio, we examine two key questions: 1) How do digital assets correlate with other components of a typical investment portfolio? and 2) What combinations of Bitcoin, Ether, and SOL have historically offered the best diversification benefits?*
Bitcoin has shown relatively low correlation with traditional asset classes over complete four-year cryptocurrency cycles. Although these correlations have shifted as cryptocurrencies became more integrated into financial markets via futures, exchange-traded funds (ETFs), and ETPs, Bitcoin has generally retained its unique diversification characteristics compared to many traditional assets.
The situation becomes more complex with Ether and SOL, which tend to be less liquid and more volatile than Bitcoin. Since 2026 began, the volatility of Ether and SOL has been approximately 35% and 44% higher than that of Bitcoin, respectively. Consequently, diversification within the cryptocurrency space often leads to increased volatility. Whether this enhances or diminishes diversification depends on the correlations involved. An asset with high volatility that moves in tandem with the rest of the portfolio may decrease diversification benefits, while one that moves in the opposite direction could enhance them.
Historically, SOL has been a superior diversifier compared to Ether. From the four-year period ending in April 2026, Bitcoin's correlation with Ether stood at 0.78, whereas SOL's correlation with Bitcoin was 0.72. This indicates that SOL is slightly less likely to move in sync with Bitcoin on a weekly basis. More significantly, when SOL diverged from Bitcoin, it was historically less likely than Ether to align with other traditional portfolio components, such as stocks. SOL's correlation with the S&P 500 Index was marginally lower than both Bitcoin's and Ether’s. Thus, based on historical correlations, SOL may serve as a more effective diversifier than Ether.