By Alex Carchidi
Over a very long holding period, it pays to invest in an asset that
has more than one way to win, and that's especially true if you're
looking at an investment in crypto. Any single narrative can stall, and
any suboptimal qualities can become severe constraints.
On that note, both XRP (XRP) and Ethereum (ETH) are popularly proposed as being good long-term crypto investments. Let's walk through what each can offer over a 10-year hold.
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XRP's institutional edge is also a drawback
Ripple, the company that issues XRP, has built one of the most compliance-friendly networks in crypto.
With features for built-in identity verification, account freezing,
transaction clawbacks, and authorized trustlines, asset issuers and
network operators can enforce custody rules at the protocol level.
That's a meaningful advantage when courting financial institutions like
banks, whose legal teams need to sign off on any new technology that
touches capital.
Given that the XRP Ledger (XRPL) now hosts about $1 billion in
tradeable tokenized real-world assets (RWAs), up from $116 million one
year ago and practically zero two years ago, it's obviously true that at
least some institutions find it to be a useful platform for managing
tokenized assets -- the crypto ownership rights to assets such as
stocks, bonds, and real estate. If the trend toward tokenization
continues, XRP's network is thus positioned to be a recipient of some
significant capital inflows, which could boost the price of the coin.
The trouble is that XRP's original investment thesis, where it would
function as a bridge currency for cross-border payments to avoid fees
and expedite transfers, is eroding badly. Ripple's own stablecoin, RLUSD,
recently crossed $1.5 billion in market cap, and the company now
promotes stablecoin settlement more prominently than XRP-based
liquidity. So banks can use Ripple's money transfer network without
touching a single coin, and the more that RLUSD gains traction, the less
XRP is needed. It's still useful for paying transaction fees on the
XRPL, but those fees are very small.
The bigger issue is that the ledger's broader ecosystem remains small
because it focuses almost exclusively on financial institutions and
their asset management needs rather than on a broader audience of users.
For example, XRPL's decentralized finance (DeFi) total value locked
(TVL) is just $49 million. DeFi isn't one of Ripple's focuses for XRP,
as XRP can't be staked, so holders have no native way to earn yield
during the course of a long-term investment, which means their returns
have one less tailwind compared to other networks.
Thus, if Ripple can't continue to successfully develop new features
for the XRPL such that its target users find it to be useful -- and
actually using the network creates a source of demand for XRP somehow --
the coin won't have good odds of appreciating much in value over time.
Ethereum takes the broader approach
Generating passive yield on an asset can meaningfully help with compounding value over years.
Therefore, for an investment held for the next 10 years or so,
Ethereum's staking is an important differentiator because it directly
accrues to holders at a current annualized rate of about 2.9%. What's
more, some Ethereum exchange-traded funds (ETFs)
now offer staking-enabled products, letting investors earn a yield
without managing their own infrastructure or custody of their own coins.
Ethereum's ecosystem outside of its staking segment also has more
independent demand drivers than any other chain, which is a big part of
the reason the coin has value. It currently commands just over half of
global DeFi TVL. Similarly, it leads in asset tokenization, with more
than $16.5 billion in tradeable tokenized assets on its chain. And it's
also positioning to be a major venue for agentic commerce, where AI
agents autonomously transact on-chain, assuming they ever do.
Of course, Ethereum is
not risk-free in any sense; its price is down 35% in the last five
years, so holding it for a long time is not any guarantee of getting a
positive return. Nonetheless, its inherent diversification as the
most-used chain for DeFi, tokenized assets, and also for general-purpose
smart contracts means that any single setback won't undermine the
thesis.
Which coin deserves the longer hold?
For a multiyear commitment, Ethereum is the stronger pick. Its
staking yield and much broader mandate in terms of its target users and
target use cases give it multiple paths to capturing value from the future of cryptocurrency, even if some will inevitably turn out to be dead ends.
XRP's compliance tooling is a real strength, but the narrowness of
its demand drivers -- and growing competition from Ripple's own
stablecoin -- leave its long-term price trajectory harder to be
confident in.
Is XRP a long-term buy right now?
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Alex Carchidi has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum and XRP. The Motley Fool has a disclosure policy.
This story was originally published by The Motley Fool
