Bitcoin (Cryptography: BTC) and XRP (Cryptography: XRP) It may be a little more secure than some crypto assets, but not so as to be solid when things are falling apart. Once the Nasdaq Composite and the S&P 500 enter the realm of fixes, investors are beginning to worry more about potential market crashes.
And are some people pondering which of these two assets will be better maintained in the crash, and which is worth buying in the aftermath?
First, let’s take a look at how Bitcoin and XRP worked in the early days of the 2020 coronavirus market crash.
Here is the chart:
Bitcoin price data by YCHARTS
As you can see, both assets were dumped violently during the crash and ditched violently alongside the rest of the market. Then both climbed over the next five years.
Bitcoin price data by YCHARTS
Bitcoin has improved slightly since the 2020 crash. That price action is generally less volatile than XRP.
XRP is a cryptocurrency with value derived from its usefulness as a medium of exchange, not a valuable store. To have value as an exchange medium, users must actively request it. Users need to transfer coins to each other and need more reasons for future needs. Given that users are financial institutions that seek to avoid incurring currency exchange fees and international remittance fees, the health and activity levels of these financial institutions are important considerations for future demand for XRP.
Market crashes tend to coincide with periods of great uncertainty, particularly economic and financial uncertainty. Like most companies, financial institutions dislike making big investments or large strategic theatre during such periods. And, on average, that means that the odds are good that they don’t have to make so many international remittances. Therefore, investors may assume that the level of XRP demand will be lower when uncertainty is the highest.
Bitcoin, on the other hand, is not much value from its utility. It could be a medium of exchange, but most investors see it as a valuable store. Given the supply dynamics, that makes sense. This ensures that over time, a small number of bitcoins will be generated, resulting in rarity. Rareness does not necessarily create demand, but as long as there is demand, it ensures that price levels continue to rise over time.
The story continues
Investors tend to settle some of the valued stores during periods of turbulence, so there is enough shortage currency to cover the unforeseen circumstances, but wise owners of Bitcoin understand that this is a compromise, as the coin is pretty good thanks to the increased poverty, as it is worth it in the long term. So, even if the holder selling the coins decides that a difficult time has passed, perhaps even in front of the market, it could also become a buyer again.
No one knows when the next market crash will occur, but Bitcoin looks like a better market collision play.
It is possible to imagine a crash situation as an event that creates a high probability of a global or localized economic recession. Under these conditions, it is unlikely that Bitcoin will flourish. Still, XRP will almost certainly suffer because the very usefulness that makes it worthwhile is simply not so appealing.
Furthermore, Bitcoin’s supply dynamics continue to move forward, regardless of whether there is a lot of demand or not. That is, when demand finally returns, new buyers compete fiercely and raise prices. XRP does not have similar mechanics, even coins that are generally suitable for purchase.
Don’t sweat too much at the possibility of a market conflict. If you are worried, keep your capital on hand so you are ready to buy.
Consider this before purchasing inventory with Bitcoin.
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Alex Carchidi has a Bitcoin position. Motley Fool has Bitcoin and XRP positions and is recommended. Motley Fools have a disclosure policy.
What happens if the market crashes? Bitcoin vs. XRP was originally published by The Motley Fool
