The cryptocurrency market has never been short of excitement, but this year has truly been a volatile journey for investors. Bitcoin has doubled in value compared to the same period last year and reached a new peak exceeding six figures. However, it’s not just Bitcoin that’s in the spotlight; two other standout altcoins - Ethereum and XRP - have also drawn attention due to strong price surges.
Despite differences in technology and models, the future of both is closely tied to the traditional financial system. In particular, the explosion of stablecoins - digital currencies pegged to fiat money - will have a significant impact on both ETH and XRP. With the Genius Act just passed, the prospect of stablecoin being widely adopted is becoming more feasible than ever.
XRP And The Potential From Banks
From the beginning, the investment thesis of XRP was based on the goal: to accelerate, reduce costs, and enhance security for cross-border payments. Ripple - the company behind XRP - has developed this blockchain and token to address major limitations in the traditional payment system: slow transactions, high fees, and heavy reliance on intermediaries.
However, the big issue is that banks can use Ripple's blockchain without needing to hold XRP. In fact, most major financial institutions choose this way. This means that the benefits of saving time and costs are still achieved, but the demand to buy XRP does not increase correspondingly.
The only exception is the On-Demand Liquidity (ODL) product, where banks can use XRP as an intermediary asset to solve liquidity issues. But unfortunately, most large banks are not short of liquidity, so they have no incentive to take on the risk from a highly volatile asset like XRP.
Notably, Ripple recently acquired Rail - a stablecoin payment platform. This move shows that Ripple is positioning itself in the stablecoin game instead of relying solely on XRP. If stablecoins are widely adopted, the role of XRP could even be diminished, as stablecoins themselves could replace XRP in many cross-border payment scenarios.
Ethereum - The Backbone Of The Stablecoin Market
While XRP is at risk of being overshadowed by stablecoins, Ethereum is in the opposite position: the more stablecoins develop, the more Ethereum benefits.
The majority of transactions of leading stablecoins, especially USDC, occur on the Ethereum network. This means that each stablecoin transaction requires a gas fee paid in ETH. This mechanism directly links the demand for ETH with the growth of stablecoins.
Not only that, Ethereum also has a burn mechanism - a portion of ETH used to pay gas fees will be burned and permanently removed from the supply. The more activity, the larger the amount of ETH burned, thereby creating downward pressure on supply and supporting long-term value.
The question arises: XRP also has a burn mechanism, so what is the difference?
The difference lies in the scale. On the XRP network, the amount of coins burned per transaction is extremely small, almost negligible to the total supply. In contrast, the amount of ETH burned is large enough to create a noticeable impact on market value.
Long-Term Choice: ETH Outperforms XRP
Looking beyond stablecoins, Ethereum is also the foundation for a series of decentralized applications (DeFi), NFTs, and the trend of tokenizing real assets (securities, real estate, etc.). These capabilities open up enormous potential, helping Ethereum maintain its position as the 'world computer' of blockchain.
Meanwhile, the future of XRP depends heavily on the decisions of financial institutions and Ripple's own stablecoin development strategy. Instead of benefiting, XRP may see its demand diminished by stablecoins.
➡️ Conclusion: If stablecoins truly become a major driving force for the next wave of cryptocurrency, then Ethereum is the clear winner. The direct connection between stablecoins and the Ethereum network, combined with the burn mechanism and vast application potential, makes ETH a much more attractive long-term investment compared to XRP.
