Bitcoinhis (BTC -1.65%) the price has doubled in the last 12 months. A few catalysts drove the world’s largest cryptocurrency up: the approvals of the first Bitcoin spot exchange traded funds (ETFs) in January, its halving in April that halved mining rewards, the Federal Reserve’s long-awaited interest rate cut in September, and 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 stable long-term 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 $1.9 trillion — and is now the 10th the most valuable asset in the world.

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But as Bitcoin matures, it may have less growth potential than the market’s smaller cryptocurrencies. Likewise, growth-oriented investors should move away from Bitcoin and buy XRP (XRP -1.61%) on the off chance that it could take off?

Differences between XRP and other cryptocurrencies

XRP is the native cryptocurrency of Ripple, 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 smaller 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 financial clients use XCurrent only to transfer fiat currencies. That’s why XRP hasn’t gained as much traction as other cryptocurrencies.

XRP cannot be mined like Bitcoin or other proofs of work (PoW) tokens. In fact, Ripple 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 across its blockchain. It releases some of these tokens periodically to stabilize its liquidity.

XRP cannot be staked (locked to earn rewards) as Ethereumhis (ETH -1.80%) Ether and Other Proof of Stake (PoS) cryptocurrencies. It also doesn’t natively support its registry smart contracts — which are used in PoS blockchains to develop decentralized applications (dApps), non-fungible tokens (NFTs), and other crypto assets.

Why might XRP get 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 US Securities and Exchange Commission (SEC) sued Ripple in 2020 and claimed that its XRP token offerings were illegal sales of unregistered securities.

This failure caused Grayscale Investments to close its XRP Trust in 2021. Coinbase Global (CURRENCY 2.02%)one of the largest cryptocurrency exchanges in the world, blocked its clients in New York from trading XRP in the same year.

Over the past 12 months, the price of XRP has fallen by more than 15% and has underperformed Bitcoin, Ethereum and other leading cryptos. However, three tailwinds could lift XRP higher over the next few years. First, Ripple’s protracted legal battle against the SEC finally ended in August with a lighter-than-expected $125 million fine. The SEC is appealing that decision, but it may be hard to overturn the results of that four-year legal battle.

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

Ultimately, Ripple plans to integrate Ethereum-compatible smart contracts into a new sidechain linked to the XRP ledger. This is not quite the same as native support for smart contracts, but it could finally attract more developers to its blockchain and encourage the 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 headwinds. Bitcoin has cleaner catalysts on the horizon – it will become harder to mine with each four-year halving, receive more funding from institutional investors, and could be more widely adopted for payments.

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