Bitcoin (BTC 1.30%) and XRP (XRP 2.80%) might not seem like direct competitors, but if you’re looking to allocate a finite amount of money, you’ll need to choose which one to put your dollars into. In that vein, even if you’re willing to invest for the long term, you should probably have a sense of which investment might be more appealing.
At least for the moment, there’s an emerging area that XRP is doing great with while Bitcoin is struggling. Here’s why it could make XRP the better buy.
One chain is much more convenient than the other
The blockchains that host Bitcoin and XRP have multiple capabilities beyond simply tracking which coins are in which wallets and allowing holders to execute transfers.
For instance, both aim to offer the ability for investors to buy, sell, create, and track real world assets (RWAs) like real estate or commodities directly on their chains. Although the push to onboard such assets to blockchains is just getting started, in the future it could be a major driver of volume and demand for these coins and others that offer the same features. So being a more convenient chain for investors looking to deal with real world assets, especially institutional investors, big banks, and other financial institutions, is an important factor when it comes to evaluating which coin is the better buy right now.
But there isn’t much of a contest here. Bitcoin’s transactions can take more than an hour to clear, and they cost about $0.37 at the absolute minimum. In contrast, XRP’s transactions cost a fraction of a penny and close within a few seconds. It’s also already in wide use by financial institutions for the purpose of transferring money quickly and inexpensively across international borders, so there’s already a big cohort of users who might be interested in trading RWAs on their chain every day.
And the non-contest is about to get even more lopsided.
On March 22, XRP’s chain will get an upgrade that will give it automated market maker (AMM) functionality, which will help to make all of the transactions on its chain more efficient for users, including those who are trading real world assets with each other. Thus, the prices that buyers are demanding will be closer to the actual transaction settlement price for their asset, and the prices that sellers are offering will be too. For financial institutions, capturing those small efficiencies can add up to large sums of money, so it’s likely to be a key feature that will drive them to onboard more of their assets onto XRP’s chain.
In contrast to XRP, Bitcoin doesn’t natively support AMMs on its main blockchain, though several workarounds have been developed on its side chains. Therefore, it’s an additional set of steps for investors if they want to trade RWAs with the help of an AMM on Bitcoin because they would need to bridge their assets over to the side chain before trading. This process is too technical for most investors who might be interested in holding some assets on the blockchain, and there are not yet any streamlined ways of doing it.
They’re both still worth owning
On the basis of the trend toward putting real world assets on the blockchain, XRP looks superior to Bitcoin.
Nonetheless, XRP isn’t the only chain in the running to capture the market for trading RWAs, and this segment is very far from maturity. In other words, it could be supplanted by a more specialized chain that does the job even better. And for a chain dedicated to being favored by financial institutions, that would be a blow, albeit not an existential threat.
Bitcoin, on the other hand, only offers this type of functionality as an afterthought, at least for the moment. So it probably isn’t going to be a significant driver of its price unless that changes. It doesn’t need to win against XRP, as investors seek to buy and hold it as a store of value rather than for its utility.
The reality is that both Bitcoin and XRP are likely to continue growing, and they’re both worth buying and holding. Bitcoin is the more conservative choice of the two, and so for most investors, it’s probably the better option. Still, it’s worth getting some exposure to XRP soon just in case it wins the fight to track assets on its chain.
