XRP Cryptocurrency: Could it Be the Next Bitcoin?

XRP is a popular crypto currency, but is it better than investing in Purpose Bitcoin ETF (TSX:BTCC.B)?

| More on:
Diagonal chain made of zeros and ones. Cryptocurrency and mining.

Image source: Getty Images

XRP (CRYPTO:XRP) is one of the most popular cryptocurrencies in the world. Formerly known as Ripple, it remains the token of the Ripple payment system. XRP is best known for its record-breaking run in 2017. That year, when Bitcoin’s (CRYPTO:BTC) 1,000% rise made headlines, XRP did far better with an earth-shattering 36,000% gain. Since then, things have cooled off a bit, but XRP remains one of the world’s most popular cryptocurrencies, in eighth place by market cap.

When you look at a smaller cryptocurrency like XRP, it’s tempting to wonder whether it could be “the next Bitcoin.” With its smaller market cap, it has the potential to deliver better returns than Bitcoin. Additionally, it offers some appealing technical features. In this article, I will explore the virtues of XRP to attempt to determine whether it could be “the next Bitcoin.”

Appealing features

Like many cryptocurrencies that were invented after Bitcoin, XRP has some advantages over its older cousin. These include

The final item on this list is one you don’t see mentioned very often. It’s quite common for smaller Bitcoin competitors to be faster and cheaper, but you don’t often see cryptos that tout their environmentally friendly nature as a virtue. The XRP consensus mechanism works by an instantaneous poll, which works faster and more cheaply than Bitcoin’s proof-of-work system. The result is less energy consumption.

Bitcoin has some advantages, too

Despite the advantages that XRP has over Bitcoin, the latter has some advantages as well:

  • “Brand” recognition
  • Widespread acceptance by vendors
  • Legal tender status in El Salvador and (soon) Arizona

These are big advantages. They mean that you can use Bitcoin to buy and sell actual goods in far more places than you can with XRP.

Bitcoin has another advantage as well: the ability to be tax sheltered through ETFs.

Through Purpose Bitcoin ETF (TSX:BTCC.B), you can protect your Bitcoin from taxation. BTCC.B, being stock market traded, can be held in a TFSA. That means you pay no taxes on capital gains you earn by trading it. In exchange for this privilege, you have to pay BTCC.B’s fund managers 1% per year. That’s a sizable fee, but it may be less than the capital gains tax on crypto holdings.

With XRP, there are fewer options for tax sheltering. Ripple ETFs do exist, but they aren’t widely available in Canada. Van Eck’s funds, for example, do not appear as tradable in my brokerage account. So, while the TFSA tax-sheltering strategy is technically available for XRP, it’s not going to be the easiest thing to pull off. This gives Bitcoin the edge over XRP on taxes.

Foolish takeaway

Bitcoin has come a long way since it was first invented in 2009. Rising all the way to a near-trillion-dollar market cap, it has become a major asset. That has been a positive for long-term holders. Now, though, with BTC already being massive, the easy gains might be over. Perhaps, then, it’s worth adding smaller alt coins like XRP to your portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool owns and recommends Bitcoin.

More on Cryptocurrency

bulb idea thinking
Energy Stocks

Get In On the Action – How to Invest In the Hottest Trends Now

Are you looking to make a fortune from stock markets? Then you have to invest in the hottest trends that…

Read more »

cryptocurrency, crypto, blockchain

After a Rollercoaster February, Is Galaxy Digital Stock a Buy?

Galaxy (TSX:GLXY) stock soared by 30% before dropping by 21%, so what's been going on, and should investors get in…

Read more »

consider the options

Should You Buy Galaxy Digital Stock Right Now?

Galaxy Digital Holdings is down 80% from all-time highs, but should you buy this cryptocurrency stock right now?

Read more »

New virtual money concept, Gold Bitcoins
Tech Stocks

These 2 Stocks Carry a Lot of Risk, But Their Upside is Huge

If you want windfall gains, you have to risk losing what you invest. These two stocks with disruptive technology could…

Read more »

cryptocurrency, crypto, blockchain

Is Hut 8 Stock a Buy in December 2022?

Hut 8 Mining Corp. (TSX:HUT) stock has been throttled in the face of a crypto bear market. It still looks…

Read more »

cryptocurrency, crypto, blockcahin

HIVE Blockchain Stock Fell 18% In October – Is It Time To Buy? 

Hive Blockchain (TSXV:HIVE) stock is down with the crypto market but ready for a BTC rebound.

Read more »

crypto, chart, stocks

2 Top Cryptocurrencies to Buy in October 2022

Ethereum and Solana are two of the most popular cryptocurrencies in the world that are well poised to deliver substantial…

Read more »

Hand arranging wood block stacking as step stair with arrow up.

2 Cryptocurrencies to Buy for Potential Recovery

The largest and most liquid cryptocurrencies may not always be the first to recover, and you may have to go…

Read more »