Ripple's XRP Vs. Ethereum's Ether: Which Cryptocurrency Will Win?

Ripple’s XRP briefly overtook Ethereum’s ether over the weekend to become the world’s second most valuable cryptocurrency. A 7% surge in XRP’s value on Sunday morning boosted its value to $24.6 billion, enough to leapfrog ethereum’s ether which had a market capitalization of $24.1 billion at that time. The increase in prices for both cryptocurrencies was part of a wider uptick in cryptocurrency markets when they reached a valuation of $225.5 billion. 

While XRP has trailed ether since being listed on cryptocurrency markets, the gap between them has mostly been erased this month. In fact, XRP leapfrogged ether three times in September as cryptocurrency market capitalizations rose.

As of this writing, Ripple’s XRP had a market capitalization of $23.2 billion and is trading at $0.58, up 2.03% from its price 24 hours ago while ethereum’s ether had a market capitalization of $23.8 billion and is changing hands at $233.17 per pop, unchanged from its price 24 hours ago. Given the close gap between both cryptocurrencies, which should you invest in?

A Dramatic Year For XRP

Ripple’s XRP has had a dramatic year so far. It reached a high of $3.36 and a market cap of $130.3 billion during the first week of 2018 largely on the back of a sustained rally in cryptocurrency markets. But it fell into a downward spiral after a barrage of criticism from experts and regulators crashed its price in the ensuing months. 

Even as Ripple inked agreements with banks to test its technology for international transfers, critics questioned its cryptocurrency’s utility in such transfers. Their criticism mainly centered around the fact that XRP is not essential nor required to make transfers. Most banks, while enthusiastic about Ripple’s technology, have been hesitant to incorporate XRP as part of the mix. The uncertainty in XRP’s regulatory status further contributed to the downward pressure on its price. 

But September has brought about a turnaround in XRP’s fortunes. Its price shot up by 115% during the month’s third week after reports that the company’s xRapid product, which uses XRP to accomplish bank transfers, would go live in a “month or so”. Even news that the company’s co-founder is selling his XRP stash in large amounts has failed to significantly dampen its upward price movement. XRP’s future price rise depends on traction for Ripple’s products as well as clarity regarding its role within Ripple’s ecosystem. (See also: Why Did Ripple's XRP Jump 190 Percent Last Week?)

Ether’s Floundering Fortunes

XRP’s rise has corresponded with a decline in ether’s fortunes. While its valuation has declined significantly from the start of this year, ethereum’s cryptocurrency has avoided the perilous fall in its price as XRP. This has largely been due to positive press and enthusiasm about smart contracts, which allow for a digital exchange of value between two parties in a transaction. Ether is the underlying cryptocurrency that powers such transactions possible and the bump in its price is largely because investors expect it to gain traction and velocity as smart contracts proliferate across industries. Comments by regulators regarding its status has further bolstered its status among investors.

Like XRP, ether’s role in smart contracts has come under a cloud in recent times. Critics argue that tokens, built on top of ethereum’s blockchain, are sufficient to conduct transactions. The situation is further complicated by the large number of tokens that have emerged on ethereum. Establishing an exchange rate for the tokens vis-à-vis ether in a dynamic environment where the value of tokens and ether fluctuate constantly with respect to each other is another strike against ethereum’s cryptocurrency. The scaling problems faced by ethereum’s blockchain also have investors worried. (See also: Could Ether's Value Drop To Zero?)

Ether’s slide has accelerated in recent times due to such criticism. That said, the ethereum blockchain is still popular among corporates, who are experimenting with it to conduct smart contracts. Numerous startups have already launched tokens on its blockchain. Investors interested in ether will need to track its utility and growth within the smart contract ecosystem.