XRP (XRP 2.04%) and Bitcoin (BTC 0.78%) are both heavyweight cryptocurrencies that are practically guaranteed to be around for the long haul. But that doesn’t mean they’re of equal value to investors looking for a fairly conservative long-term hold. Nor does it guarantee that they’ll perform similarly whatsoever.
So which of these giants is ripe for a place in your portfolio for the rest of your investing career? Let’s examine the case for each to figure it out.
Having an explicit use case can do a lot for a coin’s adoption
XRP is a coin designed to be the ultimate solution for processing cross-border payments and transactions, especially between financial institutions. To that end, it has a protocol that allows validators to mark their consensus with the results of each transaction, reducing the chances of fraud, and creating a network that can rapidly handle a large number of transactions.
Typically, the fees associated with XRP transfers are negligible, at fractions of a penny, and transactions are cleared within a few seconds or less. That makes it considerably faster and cheaper than Bitcoin, as well as other blockchains like Ethereum.
It’s no secret that XRP is the dominant fintech cryptocurrency right now, with a market cap of more than $130 billion. During the past five years alone, its price rose about 800%. That degree of consistent demand makes it worth holding at least a little bit of it.
But will that status last forever, and can it continue to grow? Here, the picture is less obvious.
There are many legacy systems for processing international payments. More are likely to be arrive in the future. And, despite XRP’s scale, it may not actually have a moat to defend its market share from other payment businesses or cryptocurrencies. So while it won’t go to zero anytime soon, its leadership position is far from guaranteed.
The more conservative asset could be better in the long term
Bitcoin needs no introduction.
As the most valuable and oldest cryptocurrency, the entire sector moves in response to Bitcoin’s price fluctuations. It’s also somewhat predictable over the long term, as its regular halvings ensure that the rate of supply growth is cut in half about every four years. Furthermore, there’s a hard cap on the number of Bitcoins that can ever be produced — 21 million in total — so it’s an inherently inflation-resistant asset.
That makes it a relatively conservative investment when paired with the fact that major changes to its core protocol are very unlikely. With its heft of $1.9 trillion in market cap, it’s also very unlikely to experience as much of the serious volatility associated with most other cryptocurrencies. And with the coin gaining deeper and deeper integration into the global financial system via its inclusion in numerous exchange-traded funds (ETFs), there is reason to believe that there will be both steady buying pressure and even less volatility in the future.
Of course, more links to the traditional financial sector will probably exacerbate the potential for a broader downturn in Bitcoin prices as well. Despite that, it gained almost 900% during the past five years, outperforming XRP and shrugging off the brutal impact of the 2022 bear market. It may not bounce back as quickly in the future, but the supply and demand dynamics will likely continue to be on its side over the long run, as institutional holders, likely including an increasing number of governments as well as major financial businesses, will be more likely to keep holding rather than selling. That will limit the number of coins in circulation.
In fact, the U.S. may soon make Bitcoin a major part of its proposed national cryptocurrency reserve. That would be a big catalyst, which is likely to put a firm floor under its price, and perhaps send it soaring.
But the biggest reason to buy Bitcoin rather than XRP is that over a long enough holding period, at least so far, it has been very hard to lose money on it.
In fact, even when buying at the coin’s peak prices, within a scant three years later, prices have been much higher every time. And when you zoom out to consider the idea of holding on to an investment forever, that’s a very powerful argument for setting up dollar-cost averaging and buying it on a regular basis until the cows come home, year after year after year. XRP might well perform the same way with the benefit of time, but Bitcoin has already done it, so it’s the better choice.
Alex Carchidi has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.
