Is XRP a Better Investment than Bitcoin or Ethereum?

The crypto market is heating up again. With the fourth Bitcoin (BTC) 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.

Despite the fourth Bitcoin (BTC -2.56%) halving occurring seven months ago and a crypto-friendly outcome in the 2024 elections, the leading coins are experiencing another skyrocketing surge.

With Bitcoin gaining 27% this month and Ethereum (ETH -5.01%) posting a richer gain of 36%, both cryptocurrencies are posting impressive gains.

However, the biggest names aren’t always the best buys. The XRP (XRP -17.96%) 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.

Both cryptocurrencies have a first-mover advantage in their respective markets. Bitcoin is the leading cryptocurrency for digital gold, and Ethereum is the top smart contracts platform.

Moreover, both cryptocurrencies have a massive network effect, with thousands of developers, businesses, and users building on their platforms. This creates a virtuous cycle where more activity attracts more participants.

In contrast, XRP is a second-mover in the payments market and a distant third in the cryptocurrency market. Ripple has a strong presence in the payments industry, but XRP is not the only token used by RippleNet.

Furthermore, XRP has no smart contracts capability and is not used for decentralized applications (dapps).

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.

Still, XRP could easily double or triple in value from here without threatening to surpass Bitcoin's market capitalization. That would be a nice return on investment, especially considering that Bitcoin could also be rising.

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.