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While Bitcoin, the “grand” cryptocurrency, has fallen below the six-figure mark, there is still a lot of optimism on the horizon from the new Trump administration, which is seen as crypto-friendly.
Despite this optimism, some investors are choosing to look elsewhere, unsure of Bitcoin’s ability to continue generating exceptional returns. Many are turning to select cryptocurrencies like XRP (XRP -2. 09%). So, is it worth talking about Bitcoin and buying XRP instead? Is XRP a worthy replacement? Let’s consider.
Every year, banks and other monetary establishments around the world spend billions of dollars in fees to send and receive funds. Transactions can take days to clear. It is clear that there is a need for innovation here.
XRP was designed to disrupt this system, enabling fast and secure transactions between monetary institutions for a small fraction of the cost of existing systems. Of course, Bitcoin can also be used in this context, however, compared to XRP, it is slow, expensive, and fails to scale (the of seven transactions consistent with the moment). Training
Because of those advantages, XRP is used in real-world establishments. Its related network, RippleNet, is used worldwide. Given that legacy systems charge global banking establishments $193 billion in fees last year, it would seem that the scale of the opportunity is enormous. If XRP could capture a significant percentage of the market, the fees charged would be huge. In addition, banks would have to buy XRP and hold it in order to transact with it, leading to a shortage of sources and a further increase in the token’s price.
That all sounds very promising and is a simple speech, which is why, in my opinion, XRP generates such a buzz. However, there are some upheavals with those fundamental assumptions that cast doubt on XRP’s value. First, the fees collected through the network are, by definition, minuscule compared to classic methods. That’s the whole XRP price proposition, and if it wasn’t true, banks and monetary establishments wouldn’t adopt it in the first place. The total price in fees that XRP can charge has to be orders of magnitude lower.
Second, despite popular opinion to the contrary, most of RippleNet’s purposes can be used without the need for XRP. Given its volatility, banks won’t need to buy and hold XRP if they can avoid it, and they can. We are already seeing this in practice. Many RippleNet establishments do not use XRP. This casts doubt on the “supply shock” theory.
XRP has been the subject of an SEC lawsuit for some time. Although a ruling ruled primarily in favor of XRP, the SEC appealed. However, a recent report revealed that the new administration will most likely stop any lawsuit opposing the SEC that does not involve fraud, meaning that XRP may soon be acquitted of its lawsuit.
Despite this good news, overall, I find XRP’s current market capitalization of $180 billion to be overinflated and divorced from reality. So, do I think you should forget Bitcoin and buy XRP instead, as some seem to be doing? No, I don’t think you should.
In fact, I don’t think you should forget Bitcoin at all. The crypto that started it all is still arguably the best digital asset to invest in. It has proven its value as a sort of digital gold, and the importance of its legitimization by the SEC’s decision to green-light spot Bitcoin ETFs can’t be understated. And if this administration is as “crypto-friendly” as it promises to be, I would be surprised if Bitcoin wasn’t the main beneficiary of any pro-crypto actions.
If you want to invest in cryptocurrencies and don’t know where to start, consider investing in Bitcoin.
Johnny Rice does not have a position in any of the mentioned. The Motley Fool holds positions and recommends Bitcoin and XRP. The Motley Fool has a disclosure policy.
Market insight driven through Xignite and Polygon. io.