Original article by: Sam Ruskin, Messari Analyst
Original translation: Luffy, Foresight News
I want to make a few points first:
I’m definitely not the first to make this point, but a few days ago, I became convinced that it’s entirely possible for XRP to surpass ETH.
I don’t think either XRP or ETH are fairly valued at current prices, but I’m not here to discuss what I think they should be valued at.
In the months following the US election, XRP experienced a significant rise. Since then, XRP prices have risen by more than 460%, and its market capitalization has surpassed BNB, USDT, and SOL. Based on fully diluted valuation (FDV), XRPs valuation is twice that of Solana and about two-thirds that of Ethereum.
Data source: Messari
It’s safe to say that no cryptocurrency has benefited as much from this election as XRP.
Data source: Messari
But I’m not here to talk about BNB, SOL or USDT, which have already been surpassed by XRP. Ethereum (except Bitcoin, which I hope to never have to write an article about) is the last one that has not yet been surpassed.
Quantitative Analysis of ETH and XRP
Data source: Coinglass
Ethereum appears overvalued by all metrics. Open interest is at an all-time high, while ETH price is still down 30% from its all-time high of $4,800.
Data source: Coinglass
On the other hand, XRP’s open interest is much healthier and more correlated with price action.
Due to the complexity of options, the open interest in the cryptocurrency market is usually more correlated with crypto-native investors than ordinary retail investors. This shows that the demand for Ethereum on the chain is relatively saturated.
Data source: Coinglass
The market capitalization of Ethereum ETF accounts for 3% of the total market capitalization of Ethereum, while the market capitalization of Bitcoin ETF accounts for nearly 10% of the total market capitalization of Bitcoin. Retail investors are not as enthusiastic about Ethereum as they are about Bitcoin, so morale on the chain is affected.
Data source: Artemis
Ethereum L1 has faced many challenges over the past few years, including competitors like Solana, Sui, and even its own L2 solutions like Base. The Ethereum community is still divided on whether L2 is essentially parasitic or essential to the economic growth of L1. Regardless of which view is correct, these capital outflows are a worrying trend for ETH.
Looking at the price action of XRP and Ethereum over the past year, it’s hard to find a reason to buy Ethereum. As @mikeykremer says in his thoughtful article: “Buy confirmed strength, sell weakness.” Market indicators suggest that interest in XRP is currently higher than interest in ETH.
Sentiment towards ETH on Crypto Twitter has clearly declined over the past 6-12 months. After the failed Blast airdrop, it became clear that the Ethereum ecosystem was oversaturated with L2 and that funding and development work from the Ethereum community was being misallocated.
Data source: Dune (21co)
When comparing active addresses and transaction counts, Base takes a significant lead, becoming Ethereum’s most popular L2.
When comparing the top two L2s by total locked value (TVL), Base is approaching $4 billion in TVL after a year and a half, while Arbitrum is at $3 billion in TVL after three and a half years. By almost all metrics, Base is the leading L2 on Ethereum.
Qualitative Analysis of ETH and XRP
The L2 scaling roadmap (modular blockchain design) aims to be as decentralized as possible by using multiple Rollups and L2s to increase throughput. Over-reliance on a single chain goes against Ethereums core goals, but Base is also Ethereums last hope for on-chain activity. This is a negative feedback loop, and I dont see a way out at the moment (unless Base becomes the sole representative of Ethereum).
XRP, on the other hand, has little similar internal conflict over the protocol roadmap. Instead, its community is united by its belief that XRP will play a central role in the future of finance. Until that belief is disproven or validated (which could drive XRP prices higher), its core supporters are unlikely to waver.
Additionally, I think there are four potential factors that could drive XRP prices higher in the coming weeks:
Trump Inauguration: Given the bullish momentum from recent macro signals, Trump’s inauguration looks like a more buy event. With Trump’s involvement in the crypto gala, figures like Garlinghouse are likely to be in attendance, which could bring more attention to XRP.
ETF Application: XRP has not yet applied for an ETF. Considering the price surges of ETH, SOL, and BTC when the ETF application announcements were released, a similar effect may occur if XRP applies for an ETF.
Capital Gains Tax Policy: Proposed cryptocurrency policies, such as eliminating capital gains tax for U.S. companies, could create tax-driven demand for XRP. As a U.S. project, XRP could attract capital reallocation due to potential tax advantages.
“Older Investors” Coin Rotation: Coins like XRP, HBAR, XLM, and ADA saw a sharp increase in price shortly after Trump’s election. A similar trend may occur around the inauguration, as it may attract buyers with similar interests and preferences.
risk
Long story short, I’m not here to encourage those XRP bears:
People woke up and realized that XRP is overvalued, and it is. Fortunately, the entire cryptocurrency market is overvalued, so XRP doesn’t stand out in that regard.
Garlinghouse has not been as active in the White House as some expected. He did vote for Kamala, but XRP is still considered the “Trump coin,” which speaks volumes about how easily investors can forget.
An alternative banking solution to replace XRP, whether it’s a cryptocurrency-based stablecoin or something entirely new.
Time Window
I am looking at short term trading opportunities, probably around a month after the inauguration. We are seeing a lot of front running of this price action right now, but I expect XRP to outperform ETH probably after Trump is inaugurated.
Assuming ETH price increases more slowly than XRP, I would expect XRP to gain another 35-50% from now.
