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Is Litecoin Still The Silver To Bitcoin? - Issue #2
Welcome to our second MadCapX Newsletter about crypto coins and tokens as we profile them and analyze the price and see what others are predicting. In addition, follow the investment portfolio that we will update on a regular basis.
The Short of It
In this newsletter, we are covering Litecoin (LTC) and is it continuing to be the silver to Bitcoins gold as it has been coined since it was created. Though it may not be as good as an investment as BTC it does pretty well as the little brother. With a spotlight on ICOs a few years back and now all hype on DiFi, Litecoin gets very little attention but yet it continues to beat out pretty well everyone else except BTC for acceptance onto major financial tech platforms, funds and exchanges.
The portfolio below will show a return on a longer hold position that started October 1st, 2020 and the second portfolio example we are adding will be BTC/USD or can use a stable coin like USDT. This second portfolio we will trade in and out of USD using an exchange such as Binance. We will be adding more portfolios in future newsletters.
The BTC Hold portfolio is up 26.20% in one month.
Back in 2011, Charlie Lee, a former Coinbase employee, created a new cryptocurrency based on Bitcoin but with modifications to the timing parameters as well as a different mining consensus algorithm. Litecoin (LTC) was born with a target block time of 2.5 minutes (compared to Bitcoin’s 10) and a total supply of 84 million, exactly 4 times the amount of maximum Bitcoin.
Seeing the advent of hardware appliances to solve blocks on the Bitcoin blockchain, Charlie wanted a mining algorithm that would be memory intensive so he opted to use something called Scrypt rather than SHA256. It was thought that creating Scrypt mining hardware would be too costly by requiring a significant amount of memory when performing its calculations. This was intentional to allow more people, who don’t have access to costly hardware, to still mine using just their home computer. While it initially worked as intended, Application-Specific Integrated Circuits (“ASIC”) were created soon enough to work with this new algorithm as the cost of RAM had decreased substantially.
Seen as the “silver” to Bitcoins “gold”, Litecoin gained dominance as a leading altcoin with many clones being created from its codebase, leading to an explosion of new cryptocurrencies in the early 2010s. Of course, many of these were purely created as an attempt by the developers to create a buzz, make money and then disappear, abandoning the associated altcoin and community.
Litecoin is often seen as a development testbed, as it implemented the Segregated Witness protocol and Lightning Network months before Bitcoin. On its own, Litecoin has not and probably will not develop any unique protocols or features, remaining strictly as just an alternative distributed and decentralized payment system.
Recently, there has been news that the developers are looking at adopting key privacy-enhancing features in an attempt to attract more cryptocurrency users to the coin. These updates are still being worked on and will need to go through testing before release sometime in 2021. Although there are already other privacy-focused coins out there like Monero, Dash and ZCash, this feature should give Litecoin a significant value boost which traders should take note of.
This chart (LTC/BTC) shows the last two halvings as white lines that have happened and the third halving event of Litecoin that will be happening in August 2023. In the last cycle, the value bottomed 553 days after the halving. If the market follows a similar pattern in anticipation of the next halving it will bring us into February 2021 before seeing bullishness. Though the exception is that the USD value of LTC will rise as BTC rises in value. Our suggestion is to base against BTC and not USD to find the best investment trade.
Again, we are looking at the LTC/BTC pairing and not the USD value on the daily chart. As you can see Litecoin continues to head downward (bearish) and that started just seven weeks before the last halving. Same as on the first halving. For now, we are not buying more LTC. But let’s see if an upward trend appears in late January or early February 2021.
Litecoin has the 5th highest volume even though it is 8th in market cap and when we take out Tether since it is a stable coin of USD and Bitcoin Cash because it is a fork of BTC, Litecoin moves to 3rd place in transaction volume.
There are over 300 million users on Paypal, they are the first major company in the financial tech sector to officially adopt virtual currencies and not just Bitcoin. Compared to their competitor, Square, who only supports bitcoin, PayPal will support Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.
The government of Venezuela is allowing both Bitcoin and Litecoin to be used on the Patria platform for remittance. There are strict United States-led sanctions that prevent banks and international payment providers from dealing with in-bound transactions. Patria claims to have over 20 million users. Venezuela has been in hyperinflation since 2017 so far in 2020 inflation between January and September was 1,433.58%, 2019 had 9,585.5% inflation, which is a sharp fall from a high of 130,060% in 2018. This is a good example of a platform looking at the gold and silver of cryptocurrencies to be used.
In a recent video, Charlie Lee is being interviewed by BitcoinMeister about Litecoin. In the video, they cover several other topics but emphasizing that the big news is LTC being added to Paypal with Bitcoin, Bitcoin Cash and Ethereum. He thinks this is even bigger news than Michael Saylor’s huge investments into Bitcoin through his personal investments and that of his company Microstrategy. He also talks about MimbleWimble (MW) launching on Litecoin in 2021 and we see that as another possible testbed for Bitcoin. Charlie does mention that he buys Litecoin on a regular basis and uses it to buy items.
So why should I use Litecoin rather than Bitcoin? Well, that is easy, lower fees and faster transactions.
Average transaction fees on Bitcoin were $8.86, ETH $0.89 and less than one cent on LTC on Nov.1, 2020. The highest average fees on BTC were $55 Dec. 2017, ETH at $12.50 Sept. 2020, and LTC hit a high of $1.50 Dec. 2017.
Disclaimer: Nothing in this newsletter is intended to serve as financial advice. Therefore, do your own research and due diligence before applying any of the techniques highlighted in this post. Any risks or trades based on this newsletter are committed at your own risk.