Well this is awkward. Normally, if someone will ask me if he or she should continue loving a person despite knowing that the competition is tough and the chances are slim, I would tell them to still go with it, and let the person decide. However, having your friend as a rival, I don't think you'd be happy knowing that one of you will get hurt.
In as much as I want to be with the person I love, I also can't bear the thought of losing a friend; hence, I think if I will be in this kind of situation, I will try to talk things through. Doing this will make us realize what we ought to do and will prevent further complications. Talking to each other will also help in perceiving whose feelings weigh more, because if we want to keep our friendship either one of us or both of us should let go. It will take a lot of thinking and talking to finally be able to decide, but I think it is what's best.