Bitcoin (CRYPTO: BTC) is the largest cryptocurrency in the world, with a market cap of $1.8 trillion, accounting for more than half of the total value of all coins and tokens in circulation across the industry. It has high demand from a large number of investors who view it as a legitimate store of value, potentially paving the way for significant long-term growth.
On the other hand, XRP (CRYPTO: XRP) was created by a company called Ripple to standardize transactions in its global payment network. Therefore, unlike most other cryptocurrencies, it has a real-world purpose, which could drive its value higher over time.
Bitcoin and XRP provided returns of 119% and 235% respectively last year, but as 2025 approaches, which coin will be worth buying?
The Case for XRP: The SEC's Shift
The Ripple payment network is designed to help global banks settle transactions directly with each other, eliminating the need for intermediaries, allowing money to flow across borders instantly.
Ripple created XRP to give banks the opportunity to standardize those transactions -- it only costs 0.00001 XRP (a tiny fraction of $0.01) to send a cross-border money transfer, making it much cheaper than sending fiat currencies, which can incur significant foreign exchange fees.
XRP has a total supply of 100 billion tokens; 58.4 billion are in circulation while Ripple controls the remaining 41.6 billion and releases them gradually to meet demand. Because the company is indeed the issuer, the U.S. Securities and Exchange Commission (SEC) sued the company in 2020, arguing that XRP should be classified as a financial security, similar to stocks or bonds.
If the SEC wins the lawsuit, Ripple will be forced to change its business model or operate under very strict regulatory frameworks. But in August 2024, a judge ruled that XRP can only be considered a security in certain cases, such as when issued to banks, but not when used for money transfers or traded on cryptocurrency exchanges.
Ripple was fined $125 million under the ruling, but investors view this outcome as a victory. The SEC has appealed the decision, but the new leadership of the agency under the Trump administration has paused the lawsuit with the intention of reaching a settlement. Things may get even better for Ripple as the new SEC chair, Paul Atkins, was sworn in last Monday, April 21.
Before taking office, Atkins was co-chair of a pro-crypto organization called Token Alliance, and a member of the advisory board at Securitize, a company that helps tokenize real assets on the blockchain to make them easier to invest in. In short, he is likely to support innovative crypto companies like Ripple rather than hinder them.
The Case for Bitcoin: A Reliable Store of Value
Bitcoin does not have any real utility like XRP, but it has avoided regulatory scrutiny due to its unique qualities. It has a fixed supply of 21 million coins that will be fully mined around the year 2140 and is completely decentralized, so it cannot be controlled by any company, individual, or government. Therefore, by definition, it is not a financial security.
In fact, the SEC has approved dozens of Bitcoin exchange-traded funds (ETFs), offering financial advisors and institutional investors the opportunity to own cryptocurrency with the safety of regulatory oversight. Many of those investors could not own Bitcoin prior to the ETF due to the risks of holding money in a digital cryptocurrency wallet (which can be prone to hacking).
Bitcoin ETFs have attracted about $110 billion in inflows so far, indicating how much pent-up demand is waiting. With this cryptocurrency continually rising to new highs since its creation in 2009, an increasing group of investors is describing it as a digital version of gold -- in other words, they believe it is a legitimate store of value. ETFs allow more investors to take advantage of that idea.
Cathie Wood from ARK Investment Management believes institutional investors could eventually allocate 5% of their assets to Bitcoin ETFs, which could lead to a price of $3.8 million per coin by 2030. This implies an astonishing increase of 3,942% compared to the trading price at the time of writing.
However, it would give cryptocurrency a market cap of $79.8 trillion, more than three times the total value of all the gold reserves above ground (at $22.1 trillion as of the time of writing). Therefore, that price target may be a bit ambitious. If Bitcoin were to match the market cap of gold, it would translate to a price per coin of $1,052,000, still representing a significant return of 1,019% from here.
And there is another potential tailwind on the horizon. The U.S. government recently created a strategic Bitcoin reserve fund, which will initially hold 207,189 coins that they seized from criminal enterprises. With Congressional approval, the government could become an active buyer of it in the open market (much like how they occasionally buy gold), which would be extremely bullish.
Conclusion
Both Bitcoin and XRP have fallen from their highs in December, as investors trimmed exposure to risky assets amid ongoing economic and political uncertainty. But history shows that sell-offs can be a buying opportunity for just one of these two cryptocurrencies.
Bitcoin has continuously risen to new all-time highs since its creation, thanks to a growing group of buyers who trust its potential as a store of value. On the other hand, XRP has not set any new records since 2018 -- even the recent price surge after the elections did not achieve its goal.
Although XRP is designed for the Ripple Payments network, banks do not actually have to use it. They can still benefit from the instant money transfers of the network even if they use fiat currency, meaning that the success of Ripple Payments does not necessarily lead to higher XRP prices. In other words, speculators may play a much larger role in determining the value of XRP compared to demand from the Ripple Payments network.
Therefore, Bitcoin may be a better investment by 2025 (and beyond), especially as the U.S. government has established a strategic reserve fund. It is hard to think of a more bullish catalyst than the world's largest economic power potentially becoming an active buyer one day.
