Is Ripple the Smartest Investment You Can Make Today?

Ripple (CRYPTO: XRP) has been a terrific long-term investment. Since 2017, the value of this popular cryptocurrency has risen by more than 1,500%. But the gains haven't always been consistent. Ripple's valuation has been very volatile over the years, full of huge spikes followed by sudden capitulations.

The past couple of months have been a down cycle for Ripple. The price of its XRP coin has dropped by more almost 40% since its January high. If you're looking for maximum growth potential, this could be your biggest opportunity of 2025. But there is one critical factor you must understand before jumping in.

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Ripple is not like other cryptocurrencies

The most important thing to understand about Ripple is that its growth journey won't follow those of other major cryptocurrencies. Consider the largest cryptocurrency: Bitcoin, which is valued at nearly $1.7 trillion -- more than 10 times the valuation of Ripple. And yet Bitcoin's value doesn't necessarily require the buy-in of conventional businesses. Much of Bitcoin's appeal comes from its position as a store of value, similar to that of gold. That is, investors buy Bitcoin simply because it's a scarce asset with limited long-term inflation. Most investors -- at least for now -- don't actually intend to use Bitcoin for daily transactions.

Ethereum is another prime example to compare against Ripple. Ethereum is essentially a global, distributed computer that can be used to execute code. That code can be a simple one-off transaction, or potentially any entire application. Yet again, no buy-in from conventional businesses is necessary. In fact, an entire decentralized ecosystem can be built on top of Ethereum, potentially creating huge demand for the network even if no conventional businesses take part directly.

Ripple is the exception to these use cases. For Ripple to succeed, it must have vast buy-in from traditional businesses like global financial institutions. The project's main goal is to simplify and streamline cross-border transactions. Ripple management argues that when a bank uses XRP to send a large sum to another bank in a different jurisdiction on Ripple's network, the transaction occurs faster, more transparently, and at lower cost than with current methods.

The good news is that cross-border transactions are a $200 trillion business worldwide. That gives Ripple a huge addressable market. But it must persuade traditional businesses to use its blockchain-powered network first.

1 Reason to buy Ripple like there's no tomorrow

The investment cases for Ripple versus Ethereum and Bitcoin couldn't be more different. Bitcoin does have ecosystem advantages, but its store of value potential is currently its biggest potential for value growth. Ethereum will need to continue expanding its decentralized ecosystem to add value to its network. Ripple, meanwhile, needs to persuade a staid industry to begin using its novel blockchain network to handle high-value transactions.

The growth potential for Ripple is clear when comparing its total addressable market of roughly $200 trillion to its current market value of about $125 billion. But whether big banks will ever trust a third-party blockchain network to handle trillions of dollars in transactions per year is entirely unknown. This is what makes Ripple's investment case so unique. The upside potential is clear, but the risk is high and difficult to quantify.

If you're looking for aggressive growth investments and are willing to accept elevated risk, Ripple could be for you. But if you're looking to manage risk and reward more effectively, Bitcoin, Ethereum, or traditional asset classes such as bonds or stocks probably are best.

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Ryan Vanzo has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.