Better Crypto for New Investors: Bitcoin vs. XRP

When you're new to cryptocurrency, the safest place to start investing is with one of the largest coins. With smaller cryptocurrencies, the risk of investing in a scam or a project that never takes off is much higher.

Two of the biggest names are XRP (CRYPTO: XRP) and Bitcoin (CRYPTO: BTC). Both are established cryptocurrencies: XRP ranks in the top five by market cap, and Bitcoin has always been the largest coin on the market. But they have very different uses and levels of risk. Here's what you need to know to decide between the two as a new crypto investor.

Image source: The Motley Fool.

How Bitcoin and XRP work

Launched in 2009, Bitcoin pioneered the concept of cryptocurrency, a decentralized digital currency that uses a peer-to-peer network to validate transactions. An anonymous developer using the pseudonym Satoshi Nakamoto created Bitcoin and set a maximum supply of 21 million coins that would be gradually mined over time.

Bitcoin uses a system called proof-of-work to validate transactions. Miners use computing equipment to validate blocks of transactions and receive Bitcoin rewards in return. While it's secure, it's also energy-intensive. Bitcoin mining consumes more power than entire countries, and the transaction process is somewhat slow and relatively expensive. That's one of the reasons people typically don't use it as a digital currency. Instead, they hold it as an investment.

Ripple, a payment solutions company, launched XRP and its blockchain, the XRP Ledger (XRPL), in 2012. The XRPL is where transactions take place, and XRP is the native cryptocurrency on that blockchain.

There's no mining process with XRP. All 100 billion XRP tokens were pre-mined, and Ripple originally held 80 billion of them. Ripple keeps its XRP in escrow and releases 1 billion per month, with some of them entering circulation and some returning to escrow.

While Bitcoin aimed to provide an alternative to traditional financial institutions, XRP's purpose from the beginning was to serve as a tool for them. Ripple offers a cross-border payment network built on the XRPL, and XRP serves as a bridge currency on that network. Banks can convert transfers to and from XRP rather than maintaining accounts in multiple foreign currencies.

The case in favor of each cryptocurrency

Bitcoin's biggest advantage is that it's the most widely adopted cryptocurrency, by both retail and institutional investors. It has a market cap of $1.6 trillion as of May 6 -- that's 60% of the entire crypto market. Institutional investments have been a key factor in Bitcoin's growth since the SEC approved the first Bitcoin ETFs in January 2024. Bitcoin ETFs collectively have about $109 billion in assets under management (AUM).

The actual utility of Bitcoin is fairly limited. Hardly anyone uses it as currency. Instead, it's a digital asset investors hold to diversify their portfolios and for its growth potential. And although Bitcoin is highly volatile, it has rewarded patient investors, as it has rebounded from every bear market.

XRP's appeal is its real-world utility and growth potential. The cryptocurrency has a legitimate role in Ripple's payments network. If Ripple succeeds in its mission to win a chunk of SWIFT's market share, then XRP could be a cryptocurrency that explodes in value.

XRP also has more room to grow than Bitcoin because of its smaller size. It has a market cap of $88 billion, so it takes far less money for XRP to double or triple than it does for Bitcoin.

But XRP is much riskier than Bitcoin, and the real-world utility is unproven. Ripple has done well at finding banking partners -- it has over 300 -- but most of those partners only use the payments network, not XRP.

Bitcoin is better for new investors

If you're starting to build your crypto portfolio, Bitcoin is the best option, ahead of XRP and any other cryptocurrency. It's not always the top performer. But because of its size, its performance tends to correlate with the market as a whole. The fact that institutional investors are on board is also a sign that Bitcoin has a higher floor than it used to.

XRP has gone through much longer downturns than Bitcoin. After reaching an all-time high of $3.84 in January 2018, it fell by over 90% within a year. It didn't cross $3 again until 2025, and it still hasn't set a new high yet. Bitcoin, on the other hand, has set new highs in 2017, 2020, 2021, 2024, and 2025.

Investing in cryptocurrency is a risky venture. The safest strategy is to keep your positions small and to make Bitcoin your core position. You could still invest in XRP if you believe in its long-term value, but I'd prioritize Bitcoin considering its track record.

Lyle Daly has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and XRP. The Motley Fool has a disclosure policy.