Bitcoin (BTC +0.19%) is the better buy than XRP (XRP -0.60%), in my view. XRP has real utility and a far stronger case than many cryptocurrencies, but Bitcoin's value proposition is clearer and less dependent on one company turning product growth into lasting demand for its token.
Now, admittedly, this is not the same as comparing two stocks, and valuing crypto is extremely subjective. There aren't really fundamentals to work from. At the end of the day -- much more so than stocks -- narrative is what matters.
XRP Ledger has moved $1.7 trillion since 2012
The bull case for XRP deserves to be taken seriously. Sending money across the globe can be a headache -- an expensive one. High fees and delays are commonplace -- whether you're an individual or a major financial institution. The reality is that much of the technology that underpins the modern banking system is outdated and inefficient.
Ripple, the company behind the XRP token, is trying to disrupt that system and make things faster and cheaper. The company also reports that the XRP Ledger (XRPL) has processed more than 4 billion transactions, representing more than $1.7 trillion in value since 2012.
The basic bull narrative is that as Ripple's payment technology is adopted throughout the banking industry by more and more clients, XRP's price will rise.
XRP tokens burned total less than 15 million tokens since 2012
The catch is that growth across Ripple's business and the XRP Ledger doesn't necessarily create all that much demand for XRP itself. That's because the token is increasingly being sidelined by Ripple's stablecoin, RLUSD.
For banks moving money globally, the choice comes down to basic risk management: Why use a volatile cryptocurrency that can drop in value mid-transfer when a dollar-pegged stablecoin does the job just as well? Ripple's own website makes it clear that they realize this and see RLUSD as the future for its institutional clients -- the ones that really matter.
Now, the obvious question here is whether it matters that banks use Ripple's stablecoin rather than XRP directly. RLUSD transactions happen on the XRP Ledger, and every transaction burns XRP. So, shouldn't mass RLUSD adoption still lead to XRP appreciation?
Not really. The gas fees that result in the burning of XRP are so minimal, they don't have a meaningful effect. It's kind of the whole point of the XRP Ledger. If gas fees were higher and more XRP were burned in every transaction, it would undermine half of the ledger's core value proposition: that it's fast and cheap.
Image source: Getty Images.
To put this into perspective: Since 2012, all transactions on the network have burned less than 15 million XRP in total. There are more than 60 billion XRP tokens in circulation today.
At the end of the day, I think the narrative driving XRP's success rests on a misunderstanding of how things actually work. As time goes on, this will become increasingly apparent to more and more investors, and the narrative will collapse. That's why I would treat any extremely bullish XRP price prediction with serious skepticism.
Bitcoin's supply is capped at 21 million coins
Bitcoin's narrative is more straightforward -- and more solid. It is a scarce asset -- the protocol caps supply at 21 million coins -- that acts like a sort of "digital gold." But unlike gold, it can be easily stored, transported, or sent around the world without much effort.
CRYPTO: BTC
Key Data Points
This has been an extremely effective pitch, and Bitcoin remains -- even after all these years -- the cryptocurrency that moves the rest of the market.
The fact that it's been around for so long and is the "original gangster" (OG) cryptocurrency mean people trust it far more than they trust most of the crypto market.
I realize that my Bitcoin analysis feels much more qualitative than my XRP analysis, but that's kind of the point. The fact that its value comes from a simple idea of scarcity rather than a practical utility is -- maybe counterintuitively -- a positive. Like I said, crypto valuation is fuzzy by definition, so in my view, simplicity is a good thing.
