What's the Better Buy Right Now With $3,000: XRP, or Cardano?

If you're looking to make an investment in cryptocurrency, it's natural to question whether it makes more sense to buy a focused fintech leader like XRP (CRYPTO: XRP), or a more traditional decentralized finance (DeFi) play like Cardano (CRYPTO: ADA). Both of these coins have made a lot of money for their investors over the last year, but the real question is: Which is a better place for your investment of $3,000 over the next handful of years, when their value could be even higher than it is today?

Let's analyze whether Cardano or XRP is the better bet.

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Cardano is accomplishing what it set out to do, but does it matter?

Cardano is the ninth-largest cryptocurrency by market cap, with a cap of nearly $27 billion. That means investors can be fairly certain that it won't go to zero, at least not in the near term.

The main appeal of Cardano as an investment is that it aims to unseat the sector's second-largest player, Ethereum, by offering lower gas fees, faster transactions, and a technical development roadmap that's more intentional and thus easier to plan around for developers. What's more, Cardano's blockchain ecosystem supports all the same functionalities as Ethereum does, including smart contracts and the ability to create non-fungible tokens (NFTs) and bridges to other cryptocurrency chains. In theory, it also aims to appeal to end-users in healthcare, agriculture, supply chain management, and other real-world fields that might benefit from having a distributed ledger.

In practice, Cardano is indeed a bit cheaper to use than Ethereum, though it isn't always faster. The average transaction costs about $0.30 and usually settles in around 30 seconds. Ethereum's transactions cost roughly $0.80 and take approximately the same amount of time to close, unless the network is under heavy load.

However, other chains, like Solana, are both larger and even faster and less expensive to transact on -- dramatically so, taking pennies and wrapping up in just a few seconds most of the time. Solana's development cycle is also significantly faster, as its management team doesn't take Cardano's deliberate and academic research-heavy approach. And Cardano's superior technical specs relative to Ethereum haven't made it a better investment over the last three years, which suggests that investors are not sold on the idea that it's achieving its core goal of surpassing Ethereum from a performance-oriented angle. The coin's value is down by 24% in that period, whereas Ethereum is only down by 4%.

So the investment thesis for Cardano to gain value in the future is that it will somehow be able to find a home in between giants like Ethereum and Solana as a result of its supposedly more farsighted management team. Without any actual proof of that in hand, however, it's not a slam-dunk buy.

Stick with XRP here

In contrast with Cardano, XRP is a coin that's in its heyday. It has a clear utility: Helping banks and other financial institutions to dodge international money transfer fees and currency exchange fees. By all appearances, it's beating its competition rather than lagging behind it.

Traditionally, sending money from an account in one country to an account in another country is done via the SWIFT system, an older technology than XRP. A typical SWIFT transfer might cost a bank $30, and take four or five business days to clear. If the bank can get the other bank at the other end of the transaction to use XRP, the difference is massive. XRP transactions clear in a few seconds, and cost fractions of a penny.

That's a very powerful driver of the coin's adoption among its target audience, to say the least. It's a big part of the reason why XRP's market cap is nearly $154 billion; many international financial institutions are buying it to use it to lower their costs and free up their funds earlier. Every time those users transact, it also generates a very small amount of fee revenue. Over time, that revenue accrues, and Ripple, the company that issues XRP, can use it to expand its network reach or ensure that it has the right technology to continue operating cheaply and quickly.

As if that weren't enough, XRP may also soon get a major catalyst for more demand in the form of the approval of exchange-traded funds (ETFs). These funds hold it so that the coin is available for purchase to investors with traditional financial accounts, rather than funds on the blockchain.

So there are a number of drivers for the coin to continue to increase in value, and it's making major headway against its competition rather than struggling against it like Cardano. If you're looking to invest $3,000 in a cryptocurrency, XRP is thus an easy choice compared to Cardano.

Should you invest $1,000 in XRP right now?

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Alex Carchidi has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Cardano, Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.