1 Cryptocurrency to Buy Before It Goes Parabolic and Overtakes Ethereum's Market Cap

Ethereum (CRYPTO: ETH) has long been the second-largest cryptocurrency by market cap, behind Bitcoin. The blockchain builds on Bitcoin's idea, introducing smart contracts, and it's powered by the native Ether token.

Many other companies have since introduced their own blockchains and tokens optimized for certain applications. One of the most successful is Ripple's XRP Ledger. XRP Ledger is designed to facilitate fast, low-cost financial transfers, and Ripple has been driving adoption among banks and other financial institutions for years. Every transaction on the ledger requires a small amount of native token XRP (CRYPTO: XRP), and it can also be used as a bridge currency for cross-border transactions.

Ripple CEO Brad Garlinghouse recently suggested that XRP could overtake Ether as the second-largest digital asset, driven by strong adoption of its blockchain. Despite the strong bias of Garlinghouse, there are reasons to remain bullish on XRP.

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Ripple is making big moves

Ripple the company is growing quickly and expanding via its own technological innovations but mostly through acquisitions. It purchased Hidden Road, a clearing and prime brokerage firm, for $1.25 billion. It added the cash-management platform GTreasury for another $1 billion. And it bolstered its stablecoin efforts with Rail. Ripple is setting up the business to handle just about anything a financial institution might need, with the hopes of spurring adoption of the blockchain.

Multiple trends could help spur adoption as well, including tokenization of real-world assets; the adoption of stablecoins, including Ripple's RLUSD; improved regulatory clarity; and practical endorsement of blockchain technology from the SEC (which previously sued Ripple).

XRP is well-positioned to capitalize on those trends, as it's a token with real utility thanks to its ties to Ripple and the XRP Ledger. If Ripple can effectively grow the activity on its blockchain, it should see strong demand for XRP tokens. And while it's constantly diluting the pot of XRP, growing usage of the XRP Ledger could offset the dilution as it burns XRP tokens with each transaction.

Can XRP really overtake Ethereum?

XRP is currently the fourth-largest cryptocurrency, with a market cap of about $88 billion, as of this writing. Ethereum's market cap sits around $282 billion. That means XRP would have to reach a price above $4.58 to overtake Ethereum (assuming the other token's price doesn't change, which is highly unlikely).

One factor beyond the fundamentals that could spur XRP's value higher is the growing adoption of spot ETFs. XRP ETFs launched last November, and they've seen very strong adoption since. Over $1 billion has flowed into XRP ETFs since November.

Still, that pales in comparison to Ethereum ETF inflows of nearly $12 billion. In other words, institutional investors may still be building stakes in XRP via ETFs relative to other cryptocurrencies. That could help reduce the amount of XRP in circulation, increasing the token's value.

While there are certainly a lot of reasons XRP can climb from here, there are still a few things holding it back. Ripple is laying the groundwork for greater blockchain utility, but it still needs to execute. Additionally, the introduction of RLUSD as a bridge currency will cannibalize the use of XRP for liquidity.

Finally, the token faces selling pressures from existing XRP holders who remain underwater on their investment. Buying forces will have to overcome all the sellers in the market before the price can move meaningfully higher from here.

The long-term potential for XRP remains high. Whether it overtakes Ethereum to become the second-largest cryptocurrency is largely out of investors' control. But at its current price, it looks like it's worth holding.

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