Bitcoin (BTC 0.93%) and XRP (XRP 5.54%) are very different types of cryptocurrencies. Bitcoin, which has a market cap of $1.7 trillion, is the world’s most valuable cryptocurrency. XRP, which has a market cap of $125 billion, is the native token of Ripple’s blockchain-powered payment platform.

Bitcoin is mined through the energy-intensive proof-of-work proof-of-work mechanism, and nearly 20 million of its maximum supply of 21 million tokens have already been mined. Every four years,  a “halving” takes place, reducing by 50% the amount of new Bitcoin that miners get for each block on the blockchain they validate. Based on the code that underlays the crypto, the last Bitcoin token will be mined in 2140. However, its finite supply makes it more comparable to gold and other commodities.

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By contrast, XRP’s entire supply of 100 billion tokens was pre-mined before it launched in 2013. Only 58 billion of those tokens are in circulation today; the rest are locked up across Ripple’s escrow accounts. It periodically releases some of those tokens to stabilize its liquidity and supply. XRP can’t be mined anymore, and Ripple’s blockchain can’t be used to develop decentralized applications in the same way as proof-of-stake blockchains like Ethereum (ETH 2.87%) and Solana (SOL 2.61%). Those limitations to its scarcity and utility make it harder to value than Bitcoin and some other cryptocurrencies.

Over the past 12 months, Bitcoin’s price rose about 40% as XRP’s price surged nearly 270%. Let’s see why XRP outperformed Bitcoin by such a wide margin — and consider which one is the better cryptocurrency to buy right now.

XRP overcomes its biggest challenges

When Ripple initially launched XRP in 2013, it hoped the token would be adopted for financial transactions on its payment platform. However, Ripple’s customers largely used its blockchain to process fiat currency transactions instead of trying out XRP.

In late 2020, the U.S. Securities and Exchange (SEC) filed charges against Ripple, alleging that its $1.3 billion offering of XRP tokens had constituted an illegal sale of unregistered securities. That lawsuit caused Ripple to lose several customers and led to the XRP token being delisted from the top crypto exchanges. Grayscale Investments also shut down its XRP Trust in 2021. All of those problems, along with rising interest rates, drove investors away from XRP.

But last August, the SEC lawsuit finally ended with a lighter-than-expected fine for Ripple. The SEC began appealing that ruling, but those appeals could be dropped as President Trump’s appointees relax the government’s oversight of the crypto market.

Meanwhile, XRP was relisted by the major crypto exchanges, Grayscale relaunched its XRP Trust as a closed-end fund (CEF) for accredited investors, and several asset management firms have submitted applications to the SEC for permission to launch XRP exchange-traded funds (ETFs). All of those developments — along with Trump’s election victory, hopes for lower interest rates, and the broader rotation back toward cryptocurrencies — helped drive XRP’s price higher.

But over the past month, XRP has pulled back about 30% as Trump’s threats of tariffs and mass deportations sparked fears of rising inflation and elevated interest rates. The high-risk category of cryptocurrency investments is still quite sensitive to macroeconomic twists and turns. This may change in the long run, making solid inflation hedges out of robust crypto names, but that’s not how it works in early 2025. So if the Fed sees inflation rising and pauses its interest rate cuts — or starts hiking rates again — a new crypto winter could begin.

Bitcoin faces uncertain macro headwinds

Bitcoin’s price surged in 2024 as its first spot price ETFs were approved, it went through its latest halving, and institutional investors accumulated more tokens. It was also driven higher by Trump’s pro-crypto campaign promises and the expectation that interest rates would come down.

However, Bitcoin’s price has pulled back by nearly 20% over the past month on the same fears of tariffs, inflation, and higher rates that chilled the rest of the crypto market. All of those challenges have largely overshadowed Trump’s plans to build a “strategic Bitcoin reserve” through big government purchases of the cryptocurrency over the next few years. The surge that many coins saw on Sunday after Trump made another social media announcement about plans for a national crypto reserve had largely evaporated by Monday afternoon.

So as long as the macro outlook stays murky, many investors will steer clear of cryptocurrencies and other speculative investments. Elevated interest rates could also keep more cash stashed away in safe-haven investments like CDs and U.S. Treasuries, or other high-yielding investments.

But over the long term, Bitcoin’s price could stabilize and recover at a faster rate than XPR and other smaller cryptocurrencies. Its scarcity makes it easier to value, inflation-wracked countries could follow El Salvador and the Central African Republic’s lead and attempt to adopt it as a national currency. Institutional investors could continue to accumulate it as an experimental hedge against inflation and the potential devaluations of fiat currencies.

The better buy: Bitcoin

XRP might generate some bigger near-term gains through its volatile swings this year, but I don’t think there are enough catalysts to keep it ahead of Bitcoin over the next few years. The rate at which new XRP becomes available won’t decline like the rate at which new Bitcoin is mined, and the XRP blockchain can only be natively used for financial transactions — in contrast to the Ethereum blockchain, which is designed to facilitate the development of decentralized finance apps.

The approval of new XRP ETFs might stabilize its price, but the soaring coin could also suffer a steeper pullback than Bitcoin if a new crypto winter starts. So for now, I’d rather stick with Bitcoin as my main cryptocurrency play instead of chasing XRP’s wild swings.