Should You Forget Bitcoin and Buy XRP (Ripple) Instead?

The crypto market is heating up again. With the fourth Bitcoin (BTC -0.74%) halving seven months in the rearview mirror and a crypto-friendly result in the 2024 elections, the leading coins seem poised for another skyrocketing surge. As of Nov. 22, Bitcoin has gained 27% this month, and Ethereum (ETH -2.56%) posted a richer gain of 36%.

But the biggest names aren’t always the best buys. The XRP (XRP -6.11%) token has soared 136% higher in November. Is XRP a better way to build wealth in the crypto market than Ethereum or Bitcoin?

Why Bitcoin and Ethereum hold more value over time

Generally, Bitcoin and Ethereum should have more value than XRP in the long run.

• Bitcoin aims to act as a general-purpose system for storing monetary value.
• Ethereum was built to power automated financial systems and other software apps, which are the foundation of decentralized finance (DeFi).
• XRP’s mission of providing quick, low-cost payments across international borders is still ambitious and legitimate — but it can’t compare to the larger visions of smart contracts and full-fledged digital currencies.

So, I don’t expect XRP to outgrow Ethereum or Bitcoin forever. I suppose it could happen if another cryptocurrency (or some entirely new financial technology) replaces Bitcoin as the leading “digital gold” or if one of the so-called Ethereum killers provides an objectively superior smart contracts platform. That would be bad news for the old crypto kings but not necessarily good for XRP and its investors.

XRP’s evolving market position

That being said, XRP has a lot of room to grow before butting heads with Ethereum and Bitcoin. This is the sixth-largest cryptocurrency by total market value today, far behind the giants at the top. It would be particularly shocking to see XRP carry a larger market cap than Bitcoin — but it could multiply in value more than 20 times over without raising that question, and I’d have to assume that Bitcoin wasn’t rising over the same period:

Data collected from CoinMarketCap on Nov. 22, 2024.

Bitcoin aims to replace physical gold as a system for storing financial value. That’s about a $14 trillion market today.

The global volume of border-crossing payments is much larger than that, estimated at approximately $190 trillion a year. But the fees, currency exchange costs, and service expenses associated with these massive money flows are far smaller at $193 billion in 2023.

So, XRP is aiming for a smaller revenue-generating opportunity. And keep in mind that its RippleNet payment service is known for moving money with minimal fees. So, the token’s actual revenue target will be far below the current banking system’s share of foreign money transfers.

XRP deserves your consideration alongside larger coins

Now you know how XRP’s long-term value compares to Bitcoin’s and Ethereum’s, and I’ve touched on the limits of this token’s target market. Bitcoin can clearly fill a role in your portfolio that XRP isn’t even trying to address, and the same can be said about Ethereum. A well-rounded cryptocurrency portfolio should have some exposure to the two largest names in this sector.

I’m not saying you should sell your Bitcoin and go all-in on XRP today. Still, the XRP token looks undervalued and has plenty of room for growth in the next few years. The legal challenge brought by the U.S. Securities and Exchange Commission four years ago should wrap up in 2025.

Money center banks worldwide are taking blockchain-based payment systems more seriously than ever, with XRP playing a leading role in that adoption trend. And the RippleNet service is getting busy — the number of daily XRP payments has tripled in six months.

I could keep talking about positive trends in the Ripple space, from liquidity pools to central bank digital currencies, but you get my point. This fairly large cryptocurrency is going places.

So, on top of the generally bullish mood in the crypto sector, XRP has several growth catalysts in play. Don’t forget Bitcoin and keep Ethereum in mind as well, but you should also make room for another winning name. A modest scoop of XRP tokens should serve your nest egg well in this bull market.

Anders Bylund has positions in Bitcoin, Ethereum, and XRP. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.