The Contrarian Case for Ripple Over XRP: Should You Buy While It's Trading Near $1?

Something interesting is going on right now when it comes to the valuation of Ripple (CRYPTO: XRP), the crypto token, and Ripple, the private business. Over the past 12 months, Ripple's private valuation has soared by more than 50%. Meanwhile, XRP -- the token at the center of Ripple's decentralized ecosystem -- has lost roughly 50% of its value over the same period.

Does the valuation disconnect provide investors an opportunity to buy XRP at a relative discount? Or should they consider buying Ripple on private markets, despite the complications of making investments outside the regular Wall Street markets?

Here's the difference between Ripple and XRP

While Ripple's ecosystem token, XRP, is often simply referred to as "Ripple," there is a big difference between the tradable token and Ripple, the private business. Owning Ripple equity is not the same as owning XRP tokens.

Put simply, the XRP token powers Ripple's decentralized ecosystem. It primarily serves as a mechanism for processing bridged payments.

It's not the only tradable token Ripple has released. The group also launched a stablecoin, Ripple USD (CRYPTO: RLUSD), in 2024. And while some experts believe that Ripple's new stablecoin can add value to its ecosystem, and thus create demand and value for XRP as a payment token, the two are designed for very different purposes, with valuations that are not expected to correlate with each other.

Image source: The Motley Fool.

While interest is growing, the primary driver of XRP's value remains speculation. Adoption of its underlying protocol remains far below Ripple's long-term expectations. Much of XRP's $70 billion market cap, therefore, is derived from expectations for growth, not historical success. So its value will fluctuate wildly depending on market conditions and investor appetite for risk.

Meanwhile, Ripple -- the private company that launched XRP -- can find success even if XRP fails. Investors largely view the company as a crypto infrastructure developer, with more ways to win than through XRP alone. Last year, Ripple raised $500 million in an investment round that valued the private entity at $40 billion. Investors, it turns out, were more bullish about the company's other efforts -- specifically its stablecoin initiative -- than about XRP.

According to a Reuters report, Ripple said the $500 million in fresh capital would help deepen relationships with financial institutions and support its expanding product suite, which now includes custody, stablecoins, prime brokerage, and corporate treasury services. The timing makes sense: banks and fintechs are warming up to stablecoins as a way to move money across borders without the usual headaches.

With XRP's value declining, the ultimate contrarian move may be to buy the private company Ripple, not the XRP token. With their valuations hovering around the same figure, the private entity arguably has more ways to win in the long term than XRP does, despite their similar price tags.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.