Opportunities and Market Reactions: Is XRP Truly Capable of Becoming the Ethereum Price Killer Amid Influences from Trump’s U.S. Elections and Suppressed ETH Prices? This article is based on a research tweet titled “The Case for XRP Flipping ETH” by Sam Ruskin, a Messari analyst, and has been organized, translated, and rewritten by Foresight News.
(Background recap: Whales have increased their holdings by $3.8 billion; is XRP heading towards $10?)
(Background information: JPMorgan: If Solana and XRP ETFs are approved, they are expected to attract $13.6 billion in funds in the first year.)
I want to declare a few points first:
I am certainly not the first person to express this view, but a few days ago, I began to firmly believe that XRP surpassing ETH is entirely possible.
I believe both XRP and ETH are not reasonably valued at their current prices, but I am not here to discuss what I think their valuations should be.
In the months following the U.S. elections, XRP has experienced a significant rise. Since then, the price of XRP has increased by over 460%, and its market capitalization has surpassed that of BNB, USDT, and SOL. When calculated based on fully diluted valuation (FDV), XRP’s valuation is double that of Solana and approximately two-thirds of Ethereum’s.
Source: Messari
It is safe to say that no cryptocurrency has benefited as much from this election as XRP.
Source: Messari
However, I am not here to discuss BNB, SOL, or USDT, as they have already been surpassed by XRP. Ethereum (except for Bitcoin, for which I hope never to have to write a similar article) is the last one yet to be overtaken.
Quantitative Analysis of ETH and XRP
Source: Coinglass
From various indicators, Ethereum seems to be overvalued. The open interest in contracts is at a historical high, while the price of ETH is still down 30% from its historical peak of $4,800.
Source: Coinglass
On the other hand, XRP’s open interest in contracts is much healthier, with a higher correlation to price trends.
Due to the complexity of options, the open interest in cryptocurrency markets is generally more correlated with crypto-native investors than with ordinary retail investors. This suggests that on-chain demand for Ethereum has become relatively saturated.
Source: Coinglass
The market capitalization of Ethereum ETFs accounts for 3% of Ethereum’s total market cap, while Bitcoin ETFs account for nearly 10% of Bitcoin’s total market cap. Retail enthusiasm for Ethereum is not as high as for Bitcoin, which has affected morale on-chain.
Source: Artemis
Over the past few years, Ethereum L1 has faced numerous challenges, with competitors like Solana, Sui, and even its own L2 solutions, such as Base. The Ethereum community remains divided on whether L2’s economic growth for L1 is essentially parasitic or indispensable. Regardless of which viewpoint is correct, this capital outflow is a concerning trend for ETH.
Looking at the price trends of XRP and Ethereum over the past year, it is difficult to find reasons to buy Ethereum. As @mikeykremer stated in his thoughtfully written article: “Buy when strong, sell when weak.” Market indicators suggest that interest in XRP currently exceeds that in ETH.
In the past 6 to 12 months, sentiment towards ETH on cryptocurrency Twitter has noticeably diminished. Following the failure of the Blast airdrop, it has become clear that the Ethereum ecosystem’s L2 is oversaturated, and the funding and development efforts within the Ethereum community have been misallocated.
Source: Dune (21co)
When comparing active addresses and transaction volumes, Base significantly leads, becoming the most popular L2 on Ethereum.
When comparing the total value locked (TVL) of the top two L2s, Base’s TVL approaches $4 billion after a year and a half, while Arbitrum’s TVL is $3 billion after three and a half years. Almost all indicators show that Base is the leading L2 on Ethereum.
Qualitative Analysis of ETH and XRP
The L2 expansion kit roadmap (modular blockchain design) aims to achieve decentralization as much as possible through the use of multiple Rollups and L2s to improve throughput. Over-reliance on a single chain contradicts Ethereum’s core goals, yet Base also represents Ethereum’s last hope for ensuring on-chain activity. This creates a negative feedback loop, and I currently see no way out (unless Base becomes the sole representative of Ethereum).
On the other hand, XRP has almost no similar internal contradictions in its protocol roadmap. Instead, its community is united in the belief that XRP will play a central role in the future of finance. Before this belief is falsified or validated (which could drive XRP prices up), its core supporters are unlikely to waver.
Moreover, I believe there are four potential factors that could drive XRP prices up in the coming weeks:
Trump’s Inauguration: Given the bullish momentum from recent macro signals, Trump’s inauguration looks more like a buying event. With Trump attending cryptocurrency parties, figures like Garlinghouse may also be present, which could bring more attention to XRP.
ETF Applications: XRP has yet to apply for an ETF. Considering the price surges that occurred when ETH, SOL, and BTC announced their ETF applications, a similar effect could occur if XRP files for an ETF.
Capital Gains Tax Policy: Proposed cryptocurrency policies, such as the elimination of capital gains tax for U.S. companies, could drive demand for XRP due to tax incentives. As a U.S. project, XRP might attract capital reallocation due to potential tax advantages.
“Senior Investor” Coin Rotation: Coins like XRP, HBAR, XLM, and ADA saw significant price increases shortly after Trump’s election. A similar trend could emerge around the inauguration, as it might attract buyers with similar interests and preferences.
Risks
To make a long story short, I am not trying to encourage those who are bearish on XRP:
People may wake up and realize that XRP is overvalued, which it indeed is. Fortunately, the entire cryptocurrency market is overvalued, so XRP does not stand out in this regard.
Garlinghouse’s level of activity in the White House is not as high as some expected. He did vote for Kamala, but XRP is still considered a “Trump token,” highlighting how easily investors can forget.
An alternative banking solution could replace XRP, whether it be a cryptocurrency-based stablecoin or something entirely new.
Time Window
I am looking for short-term trading opportunities, possibly around a month after the inauguration. We are currently seeing many instances of this type of price surge, but I anticipate that XRP surpassing ETH may occur after Trump’s inauguration.
Assuming ETH’s price rises more slowly than XRP, I expect XRP to have an additional 35-50% increase from now.
