Bitcoin vs. XRP: Which Will Be the Top Investment in 2025?

The year 2024 is proving to be an outstanding one for cryptocurrency investors. The collective value of all cryptocurrencies has now reached a staggering $3.5 trillion, more than doubling its total at the close of 2023.

Leading cryptocurrencies such as Bitcoin (CRYPTO: BTC) have contributed significantly to this increase, but even lesser-known, more speculative tokens have shown impressive performance. Notably, XRP (CRYPTO: XRP), despite recent regulatory challenges, has surged by 250% in 2024.

A decline in interest rates has boosted the attractiveness of growth assets like stocks and cryptocurrencies. Additionally, there is optimism that the upcoming Trump administration will adopt a more supportive stance towards cryptocurrencies, potentially opening new avenues for value creation within the sector.

With a potential regulatory easing on the horizon, XRP could stand to gain substantially, but the question remains: will it outperform Bitcoin in 2025?

Exploring the Potential of XRP (Ripple)

Global banking involves complex, often slow, processes for international money transfers. While some banks utilize the SWIFT network, others do not, necessitating intermediaries for each transaction.

Ripple aims to streamline this process with its Ripple Payments (formerly RippleNet) network, which enables direct communication and instant settlement between financial institutions, regardless of their existing infrastructure.

Ripple has also introduced the XRP crypto token to standardize transactions across this network. This means, for instance, that an American bank could transfer XRP to a Japanese bank instead of USD, avoiding currency exchange fees and reducing transaction costs. The banks can then convert XRP into their preferred fiat currencies independently.

There are 100 billion XRP tokens created, with 57 billion currently in circulation. Ripple controls the remaining 43 billion, releasing up to 1 billion tokens monthly to satisfy institutional demand. In 2020, the U.S. Securities and Exchange Commission (SEC) initiated a lawsuit against Ripple, arguing that XRP should be classified as a security, which would impose strict regulations on its distribution and Ripple’s operations.

The lawsuit saw partial resolution in August 2024, with Ripple incurring a $125 million fine. The court ruled that XRP was a security only under specific circumstances, such as institutional sales, but not when traded on exchanges or used for transactions.

With the SEC appealing the court’s decision, and President-Elect Trump nominating cryptocurrency advocate Paul Atkins to lead the SEC (subject to Senate confirmation), investors are hopeful that Ripple’s legal challenges will diminish after the new administration assumes office on January 20.

Most of XRP’s gains this year came post the November 5th election. However, trading at $2.21 currently, it remains below its all-time high of $3.40 reached in 2018. While there’s potential for growth in 2025, investors should approach XRP with caution due to its speculative nature.

The Argument for Bitcoin

Bitcoin operates independently of a central authority or company, which means no additional Bitcoins can be created beyond the capped supply of 21 million, with 19.8 million already in circulation. The final Bitcoin is expected to be mined by 2140.

Bitcoin has avoided the regulatory issues faced by Ripple, and this year, the SEC approved several Bitcoin ETFs, allowing easier and regulated investment by financial advisors and institutional investors. The Bitcoin ETF market now manages assets exceeding $110 billion, indicating robust demand.

Bitcoin’s value has steadily risen, reaching new highs, despite occasional significant price corrections. Its limited supply and decentralized nature bolster its appeal as a reliable store of value.

Some experts liken Bitcoin to a digital form of gold. If Bitcoin’s market cap were to reach the current total value of all gold reserves ($17.7 trillion), its price would need to increase by 831%, suggesting a future price of approximately $893,000 per Bitcoin.

Michael Saylor, co-founder of MicroStrategy which holds over 439,000 Bitcoins, predicts a potential rise to $13 million per Bitcoin by 2045, anticipating broad adoption following potential U.S. regulatory changes. However, this forecast is highly optimistic, especially considering it would represent a value nearly nine times the entire U.S. economy in 2023.

Final Thoughts

Although Ripple Payments is a groundbreaking network, banks are not mandated to use XRP for transactions, which means its success doesn’t necessarily translate to increased XRP value.

Investing in XRP remains highly speculative, and its price trajectory is unpredictable.

While Bitcoin is also speculative, it has consistently demonstrated its value retention capability. Coupled with the SEC’s approval and the proliferation of Bitcoin ETFs, Bitcoin presents a more reliable investment for potential appreciation in 2025 compared to XRP.

Anthony Di Pizio holds no position in any mentioned stocks. The Motley Fool recommends Bitcoin and XRP. The Motley Fool has a disclosure policy.

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