Unpublished research similar to mine
You need to cite the paper only if you use it or depend on it in your research in some way. However, if you have a section on "Similar Research" then you should probably mention it there. You don't forfeit anything if your work was independent. For purposes of your degree, your supervisor will decide if you have made a proper contribution. For purposes of publishing, the editors and reviewers will decide on priority. Just because you don't cite it doesn't mean that it isn't known. 

Independent research on a topic goes on constantly in the real world. 

The worst case for you is that if you don't cite it and someone thinks you have plagiarized. But the real world situation is as it is. You can't change that.