Ethereum (ETH 5.54%) and XRP (XRP 6.93%) aren’t in direct competition in terms of their target users or their general objectives. But if you’re looking to invest $5,000, it makes more sense to concentrate your capital into just one, rather than spreading it between both.
When it comes to the positioning of these two assets, their situations are more or less the opposite. That means that for most investors, one of them is a much better option to buy now. Let’s explore why that’s the case, and figure out which it is.
Technical, organizational, and social factors win the day here
XRP is a chain in the midst of ascendance.
It’s gaining new features, such as automated market maker (AMM) functionality and new tools for regulatory compliance, launching new stablecoins in international markets, and making big strides with regulators in the U.S., which recently dropped a lawsuit against Ripple, the company that issues XRP. It’s also making its chain a more appealing place for financial institutions to do business by offering them a blockchain platform to trade their real world assets like bonds and real estate. If a good regulatory environment persists, the crypto could also get a boost sometime this year if regulators approve exchange-traded funds (ETFs) that hold XRP.
As if that weren’t enough, it’s gaining traction in countries like the UAE and Portugal, where it will likely see further adoption by offering lower-cost money transfers to banks. That wouldn’t be happening if the financial institutions there didn’t see value in using XRP’s network. It’s a very clear sign that the core investment thesis for buying the coin is alive and well. That wouldn’t be happening if the chain’s leadership was pursuing a faulty strategy that didn’t resonate with its target audience.
Alas, Ethereum can’t claim any of the same accomplishments, and it has been struggling a lot recently.
Amid a leadership shakeup at the Ethereum Foundation, ongoing difficulty in securing interest from investors and developers faster than its arch-rival Solana, and underperforming decentralized finance (DeFi) projects relative to its competitors, the chain is somewhere between severe doldrums and a crisis. Despite making significant progress on one of its long-standing technical problems (high gas fees for users), it still isn’t fast enough or cheap enough compared to its peers. And it doesn’t have too much in the way of potential regulatory catalysts coming up compared to XRP.
There’s no debating that Ethereum is still a major cryptocurrency. But unless something dramatic changes to keep it competitive, it might not retain that status forever.
There’s a contrarian play to make, if you’re daring
XRP is the better cryptocurrency to buy now with $5,000, and it isn’t a particularly close contest. Exceeding the standard that XRP is seeking to beat, specifically the costs and pace of SWIFT money transfers, is already in the bag. The chain’s tight focus on serving financial institutions also gives it a very clear pathway to continue with its tech development to cater to their needs, without actually requiring all that much creativity. In other words, it can focus on execution rather than innovation. That’s not as risky as the reverse, especially not when there’s already evidence that its strategy is paying off.
Nonetheless, reports of Ethereum’s demise have historically tended to be very much exaggerated, so there’s an opportunity here for those who are more interested in taking a risky and contrarian path that might pay out more. There is no guarantee that its price will ever reach its all-time highs again. Still, with new leadership at the helm, and a new chain upgrade called Pectra in testing, a turnaround is very possible.
So if you’re willing to take a hearty risk and hold on to your position for at least a few years, there is probably at least some upside in store for Ethereum buyers right now. For most investors, it’s a better move to buy $5,000 of XRP instead and hold it for the same amount of time, as the balance of risk and reward is more favorable overall.
Alex Carchidi has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.
