The value of all cryptocurrencies in circulation soared to a new high of $3.9 trillion in December, shortly after Donald Trump won the presidential election on Nov. 5. Since Trump campaigned on a pro-crypto agenda, investors immediately started pricing in the potential of friendlier government policies and lighter regulation, which could create value across the industry.

XRP (XRP -3.60%), which was created by a company called Ripple in 2012, was one of the best performers last year with a whopping 235% gain. Bitcoin (BTC -2.12%) also logged an impressive return of 119%, further solidifying its position as the world’s largest cryptocurrency.

But 2025 is off to a rocky start for both. Although XRP is up slightly on the year, it’s down 32% from its 52-week high from January. Bitcoin, on the other hand, has started the year with a decline of 14%. For investors who believe in the potential of cryptocurrencies, the recent dips might spell an opportunity — but is XRP or Bitcoin the better buy this year?

Image source: Getty Images.

The case for XRP (Ripple)

Sending money across borders can be slow and expensive. Networks like SWIFT (Society for Worldwide Interbank Financial Communication) were established to help global banks communicate with one another and settle transactions more quickly, but not every financial institution is on board, so there isn’t a holistic solution just yet.

Ripple created the Ripple Payments network to tackle that problem. It facilitates direct communication between banks no matter what infrastructure they use, so they can settle transactions with one another in seconds rather than days.

Ripple created the XRP token to standardize those transactions. For instance, an American bank can convert U.S. dollars to XRP tokens, and then send those tokens to a Japanese bank, eliminating currency exchange fees and other transaction costs (it only costs 0.00001 XRP per transaction, or $0.000023 at the current price, so a minuscule fraction of one cent). 

Ripple ran into significant regulatory issues back in 2020, and it was sued by the U.S. Securities and Exchange Commission (SEC). Since Ripple controls 42 billion of XRP’s total supply of 100 billion tokens, and releases them gradually to meet demand, the SEC believed the crypto should be classified as a financial security (like a stock or a bond). If the SEC won in court, Ripple would have been forced to abide by a strict set of regulations, severely disrupting its business.

The case was mostly resolved last August when a judge fined Ripple $125 million, and ruled XRP is only a security in specific circumstances like when it’s issued to institutions. However, it might not be a security when used in transactions or traded on crypto exchanges, a ruling that investors viewed as a win. The SEC appealed the decision, but there is growing speculation the case could be withdrawn.

That’s because the Trump-appointed acting chairman of the SEC recently started pausing the agency’s active legal cases against other businesses like crypto exchange Binance, and even filed to withdraw from another case against Binance rival Coinbase Global entirely. It’s possible Ripple’s regulatory woes could also disappear under this administration, which would lift the cloud hanging over the company, and potentially pave the way for further upside in XRP.

Image source: Getty Images.

The case for Bitcoin

Bitcoin’s market capitalization of $1.7 trillion represents more than half of the value of all cryptocurrencies in circulation, which stands at $2.8 trillion as of this writing. Although it’s a speculative asset like most other coins and tokens, a growing number of investors consider it to be a legitimate store of value — kind of like a digital version of gold — because of its unique qualities.

Bitcoin is completely decentralized, meaning no person or company can control it. Its total supply is forever capped at 21 million tokens, with about 19.8 million currently in circulation, and the rest to be “mined” between now and the year 2140. Finally, its blockchain is a secure and fully verifiable system of record. Because of those features, Bitcoin doesn’t fit the definition of a financial security, so the SEC actually approved dozens of exchange-traded funds (ETFs) for the cryptocurrency last year.

Bitcoin ETFs eliminate the need for investors to manage their own digital wallets, which can be susceptible to hacks, often resulting in complete losses. As a result, ETFs are attracting new investors like financial advisors, who can use them to give their clients some Bitcoin exposure in a safe and regulated manner.

ETF approvals were one of the reasons Bitcoin rose last year. Cathie Wood, who runs Ark Investment Management, believes ETFs can pave the way for institutional investors to eventually park 5% of their assets in Bitcoin, which could translate to an eye-watering price per coin of $3.8 million in the future. That implies a gain of about 4,500% from Bitcoin’s current price of about $85,000.

In my opinion, that probably isn’t realistic. But if more investors treat Bitcoin as a legitimate store of value over time, perhaps a more achievable price target might be $971,400. That would give Bitcoin a market capitalization of $20.4 trillion — the same value of all mined gold as of this writing. It implies a potential upside of about 1,000% from where it trades today, which would still be a fantastic return.

The verdict

XRP has an intriguing real-world use case within the Ripple Payments network, which could drive its value significantly higher over the long run. But there is a catch — financial institutions don’t have to use XRP to benefit from instant payments via Ripple, because they can also transact in fiat currencies.

That means XRP is mostly a speculative asset like many other cryptocurrencies, which might be why it still hasn’t surpassed its record high from 2018, even after its powerful rally last year.

Bitcoin, on the other hand, has clear momentum, and investors aren’t the only ones who believe it’s a good store of value. Earlier this month, Trump signed an executive order to establish a Strategic Bitcoin Reserve within the U.S. government. It will primarily hold Bitcoin regulators have seized from criminal enterprises, but it could pave the way for the government to become a buyer in the open market one day, pending approval from Congress.

It would be yet another catalyst capable of driving further upside in Bitcoin, which is why I think it’s a better buy than XRP this year (and beyond).