The price for Ripple (CCC:XRP-USD) surged on March 22 after the cryptocurrency’s parent, Ripple Labs, caught a break in its lawsuit with the Securities and Exchange Commission (SEC).

Magistrate Judge Sarah Netburn stated that investors outside of Ripple Labs were not trading illegal securities. As a result, cryptocurrency exchanges can resume listing XRP-USD tokens. 

While the XRP-USD price jumped on the news, it was back down below 48 cents by March 25. At the time of publication, it’s trading around 57 cents. Like most cryptocurrencies, volatility is its strong suit. 

Ripple Labs recently produced a report about central bank digital currencies (CBDCs) that suggested XRP-USD is a good example of a neutral bridge asset that governments can use to get money into the hands of the unbanked quickly and efficiently. 

While I do not doubt that cryptocurrencies can play a major role in the future of banking, as an investment, the seventh-largest cryptocurrency remains on the outside looking in. If you’re going to move some of your greenbacks into a cryptocurrency, XRP-USD would not be my first choice. 

Here’s why.

Buying XRP-USD as a Cryptocurrency

In my last article about Ripple, I stated that it faced a steep, uphill climb both as a company and a cryptocurrency. The judge’s comments aside, I still feel this way.

The cryptocurrency is up 141% year-to-date. However, it’s a long way off the all-time high of $3.40. There’s no question those who bought at the beginning of 2021 are happy with the outcome.

The judge’s actual comments should provide hope for those inside and outside Ripple Labs. 

“My understanding about XRP is that not only does it have a currency value but it has a Utility and that utility distinguishes it from Bitcoin and Ether,” the judge stated in the most recent court session for the SEC’s lawsuit against the company. 

So, if the judge’s assumption is taken at face value, both XRP-USD and Ripple Labs have a future. 

The problem is the SEC finds that the people behind Ripple Labs were the only ones committing illegal securities trading. If this is found to be true, the damage to the company’s reputation might be impossible to recover from. 

Were the company to disappear, what would happen to the cryptocurrency? 

My InvestorPlace colleague, Josh Enomoto, who actually owns XRP-USD, argues that if the company can’t successfully prove that Ripple is decentralized, it’ll be in a world of hurt. 

“[T]he SEC will continue to hammer the centralization argument. Honestly, it doesn’t look good that the protocol appears centralized — this was long a criticism of the Ripple coin,” Enomoto wrote on March 26.  

“Here’s why it’s important: If Ripple distributed XRP-USD for the sole purpose of raising capital for its businesses and giving the impression that investors could potentially profit from a valuation rise, how is that different from a publicly-traded security?”

He finishes by suggesting that Ripple Labs’ best argument is that the Ripple token was always intended to be a conduit for undertaking financial transactions quickly and efficiently, thereby providing actual utility to the tokens’ holders. 

Needless to say, the future remains up in the air until the SEC lawsuit gets sorted. 

Bitcoin or Ethereum Make More Sense

If you’re going to invest in a cryptocurrency, my opinion is you either buy Bitcoin (CCC:BTC-USD) or Ethereum (CCC:ETH-USD). Bitcoin remains the only true example that possesses a true store-of-value; Ethereum, while not a store-of-value, is likely to continue to appreciate because of its utilitarian nature. DeFi (decentralized finance) will capture the world thanks to Ethereum.

In February, I suggested that owners of Ethereum might want to get while the getting’s good because its valuation had become a bit frothy. At the time, it was trading around $1,846. Down about 1% over the past six weeks, it could certainly fall further. Especially given that ETH-USD has appreciated about 30% more than Bitcoin over the past year. 

I’m a huge proponent of DeFi. Therefore, I’m always going to follow cryptocurrencies such as Ethereum that contribute to the increased use by financial parties to efficiently complete frictionless transactions.

Both Ethereum and Bitcoin provide tangible value in their own way. I think Ripple has to figure out how to be both a store-of-value and utilitarian in nature. That, or opt for one and stick to that. 

In my opinion, a utility play is the better way to go. Until then, you’re better off buying BTC-USD or ETH-USD if you’re looking for a cryptocurrency to own.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.