Litecoin price has skyrocketed in the last week. Jumping 111% on the back of the bitcoin futures market opening in America.
It’s a big move for this crypto. That said, the price ramp here is probably more of a reflection of the swelling crypto market as whole rather than any news from the coin itself. And Litecoin’s performance does tend to follow bitcoin’s.
This strong, positive relationship makes sense. Litecoin is essentially a ‘spin-off’ of bitcoin.
However, Litecoin does have some interesting qualities of its own…
What is Litecoin?
If you think of bitcoin as digital gold, as I do, you can think of Litecoin as digital silver. Just as Litecoin founder Charlie Lee suggested when he created it.
This is partly because Litecoin is actually a fork of bitcoin. One of the first, in fact. This means that in many regards it is almost identical to bitcoin.
Like bitcoin, Litecoin is a peer-to-peer currency and a store of wealth. However, it does have some advantages over its older, more well-known sibling.
Notably, its transactions are cheaper, and faster. A fact that has led many to suggest that Litecoin is highly undervalued compared to bitcoin.
Bitcoin has also been growing so rapidly that people have been reluctant to use it as a currency. Litecoin is favoured by many to act as the primary digital money until the bitcoin price levels out.
Certainly, part of the answer to the difference in price is that bitcoin has better name recognition. And the fact that it was the first-mover in the cryptocurrency space. However it could also be argued that they are essentially the same coin. The only difference being that the technology behind Litecoin is slightly better.
Why is it exploding now?
There’s no one particular reason. But there are a lot of good secondary reasons.
As I said earlier, the American bitcoin futures market has lifted the profile of cryptos in the eyes of more traditional markets. But that still leaves the question of why Litecoin in particular has done so well.
The answer may lie in an exchange called Coinbase.
Coinbase is currently the largest cryptocurrency exchange. And its user base is ballooning in line with bitcoin. It recently surpassed YouTube as the #1 app on the Apple app store. But here’s the kicker: Coinbase only allows trading of three coins. Bitcoin, ethereum, and Litecoin.
The reason for this is security. However, it also gives ethereum and Litecoin quite an advantage over other coins. And this is especially true for Litecoin.
Bitcoin and ethereum make up about 73% of the entire crypto market cap.
Litecoin is no minnow itself, given that it’s market cap sits at around US$13 billion. However its name recognition is far lower than the other two giants.
Another string to the Litecoin bow, is what I call the ‘Vitalik’ effect. Vitalik Buterin is the founder of ethereum, and as close to a crypto prophet as the community has. Many look to him for clarity on contentious issues in the world of crypto.
This is because the founder of bitcoin, Satoshi Nakamoto, has mysteriously vanished.
Litcoin founder Charlie Lee has a similar halo-effect to Vitalik. He is a crypto pioneer. One that is highly respected in the community. His presence alone gives people confidence.
Charlie also comes across very well in the media, which gives Litecoin good public exposure.
Where to from here?
As the cliché goes, this is anyone’s guess.
But the fundamentals of Litecoin are the same as they have always been. That is, basically a faster, cheaper bitcoin.
Fundamentals do not always lead to value, as the market is influenced by many factors.
But in comparison to all other cryptocurrencies, Litecoin stacks up pretty well.
Junior Analyst, Money Morning
PS: Want to find out more about the secret world of bitcoin & Litecoin? Click here.