BitcoinIt is (BTC -1.58%) the price has doubled in the last 12 months. Several catalysts drove the world’s leading cryptocurrency higher: approvals of the first Bitcoin exchange-traded funds (ETFs) at spot prices in January, its April halving that cut its mining rewards in half, the Federal Reserve’s long-awaited interest rate cut in September, and its growing adoption as a recognized currency in countries like El Salvador and the Central African Republic .

Bitcoin’s recovery could convince many investors that it is a long-term stable asset like gold or silver. It already has a market cap of $1.4 trillion – compared to gold’s market cap of $18.6 trillion and silver’s market cap of $1.9 trillion – and is now the 10th most valuable asset in the world.

Image source: Getty Images.

But as Bitcoin matures, its upside potential may be less than that of smaller cryptocurrencies on the market. Should Growth Investors Ditch Bitcoin and Buy XRP (XRP -1.45%) at the risk of it taking off?

The differences between XRP and other cryptocurrencies

XRP is Ripple’s native cryptocurrency, a blockchain ledger that is used as a cheaper, faster, and more secure alternative to the widely used SWIFT (Society for Worldwide Interbank Financial Telecommunication) protocol for money transfers. Several small financial institutions, including Travelex Bank, Tranglo and Sentbe, use Ripple’s XCurrent network for their money transfers.

But instead of gradually adopting the XRP token for payments, most of these financial customers only use XCurrent to transfer fiat currencies. This is why XRP has not gained as much popularity as other cryptocurrencies.

XRP cannot be mined like Bitcoin or any other proof of work (PoW) tokens. Ripple actually pre-mined its entire supply of 100 billion tokens before its launch in 2013, and locked more than half of those tokens in escrow accounts on its blockchain. It periodically releases some of these tokens to stabilize its liquidity.

XRP cannot be staked (locked to earn rewards) like EthereumIt is (ETH -1.69%) Ether and other proofs of stake (Point of sale) cryptocurrencies. Its ledger also doesn’t natively support smart contracts — which are used in PoS blockchains to develop decentralized applications (dApps), non-fungible tokens (NFT), and other crypto assets.

Why might XRP attract more attention?

XRP’s fixed supply, inability to be mined, and lack of utility have made it a difficult cryptocurrency to love. To make matters worse, the United States Securities and Exchange Commission (SEC) sued Ripple in 2020 and claimed that its XRP token offerings were illegal sales of unregistered securities.

This setback led Grayscale Investments to close its XRP Trust in 2021. Global Coinbase (COIN 2.02%)one of the world’s largest cryptocurrency exchanges, blocked its New York customers from trading XRP that same year.

Over the past 12 months, the price of XRP is down more than 15% and has underperformed Bitcoin, Ethereum, and other top cryptocurrencies. Still, three tailwinds could push XRP higher in the coming years. First, Ripple’s long legal battle against the SEC finally ended in August with a lighter-than-expected fine of $125 million. The SEC is appealing the decision, but it may be difficult to overturn the results of this four-year legal battle.

Second, Grayscale recently relaunched its XRP Trust as a closed-end fund (CEF) For qualified investors in response to Ripple’s partial victory. Bitwise also recently filed a registration statement with the SEC to launch the first XRP ETF at the market spot price. These new funds could stabilize the price of XRP and attract more traditional investors. Coinbase even allowed New York residents to start trading XRP again.

Finally, Ripple plans to integrate Ethereum-compatible smart contracts into a new sidechain linked to the XRP ledger. It’s not quite the same as natively supporting smart contracts, but it could finally attract more developers to its blockchain and encourage adoption of the XRP token.

But is XRP a worthy replacement for Bitcoin?

XRP’s short-term headwinds are dissipating, but I’m less sure about its long-term tailwinds. Bitcoin has clearer catalysts On the horizon: It will become harder to operate with each halving every four years, it will receive more funding from institutional investors, and it could be more widely adopted for payments.

With XRP, I still see a token that is not rare or useful enough to be considered a great long-term investment. This could be an interesting trade in the short term, but I don’t think it’s time to abandon Bitcoin and bet on XRP’s potential outperformance.