The crypto world continues to grow. The total market cap of crypto currencies now stands above $160 billion, up from near $90 billion at the start of August and up from $66 billion in mid-July during investor anxiety about the Bitcoin hard fork and/or a correction from the enormous rise in early 2017.
At the head of the growth is Bitcoin, the original currency, and still the predominant one - holding a near 47% share of the total market cap, despite there being over 800 currencies now listed as open for trading on a variety of exchanges.
Bitcoin itself has surpassed $4600 this month, double where it was trading at during the mid-July lull described above. Bull analysts see it hitting $5000 in the near future, while others are calling for $7500 or even $10,000 by year’s end.
There are a few items that could hold Bitcoin from hitting that price point, including regulatory affairs from the SEC and other governing bodies. However, I don’t see that as the main threat to Bitcoin’s adoption curve. Instead, that issue is its speed, cost, and anonymity. In analyzing these, and especially in the first two items, it becomes apparent that Litecoin - often called the “silver” to Bitcoin’s gold - is a potent adversary to Bitcoin and one that could be poised for global domination.
First, a few fundamentals. Litecoin currently trades around $62, with a market cap above $3 billion. As such, it’s the 5th largest coin in the crypto world. There are 52 million Litecoins available on the market, with a max supply of 84 million. Bitcoin has a max supply of 21 million, exactly one fourth of Litecoin, which is no accident.
Most importantly, however, is that Litecoin is up an extraordinary 1300% from the beginning of the year. Since Bitcoin was already a formidable currency, its rise hasn’t been that dramatic.
Lastly, Litecoin has become quite popular among traders in Asian markets (who have generally driven trends in the larger crypto market). On certain Asian markets, the volume of trading on exchanges has exploded.
As the article states:
Litecoin’s rise has been accompanied by an eruption of volume on Asian cryptocurrency exchanges. At present, Litecoin’s single greatest trading pair is LTC/KRW on Bithumb, which accounts for $181 million in daily volume. LTC/CNY pairs on OKCoin and Huobi account for a combined volume of $250 million, while BTC and USD pairs do not appear until 4th and 5th.
So there’s some huge interest for Litecoin among these markets, and it’s not a coin that’s traded for (or to) Bitcoin. It’s clearly a stand-alone investment at this point.
But what is Litecoin and why does that matter for Bitcoin investors?
Litecoin is a coin meant to mirror Bitcoin. It’s built on the same protocol and technology as Bitcoin. This is vital because Litecoin can leverage Bitcoin’s engineering community, either to mirror updates, or to improve itself should it take over dominance from Bitcoin one day.
Litecoin is meant to be “light” as the name implies and move both faster and cheaper than Bitcoin. It does this by creating a block in 1/4th the time it takes Bitcoin to do so.
Bitcoin, which was meant to empower people to send money through a de-centralized system quickly, might not be able to pull that off when the amount of transactions scales enormously. But, Litecoin can.
In fact, now that the “segwit” update has been implemented into both technologies (remember Litecoin uses the same as Bitcoin), there will be a larger block size and some fun and a new technology called Lightning Network. This will allow Litecoin and Bitcoin to be traded timelessly and almost costless. Moreover, something called “atomic swaps” are in the pipeline to allow for more seamless trading among different coins.
All of this is good, and if Bitcoin can keep speed, it marks an improvement for that coin, but it doesn’t look like it’s trending in that direction.
The second consideration is on fees. Currently, Bitcoin users on certain exchanges are looking at (sometimes set) fees of nearly $7 to send or move Bitcoin. This may be great for miners, but is terrible for consumers, as well as the outlook for Bitcoin’s move to prominence.
That kind of fee just simply isn’t going to turn the tide on the modern banking system, itself accused of having frustratingly high fees to move capital.
Bitcoin’s August 1st hard fork was supposed to solve for this and indeed Bitcoin Cash might be the answer. Yet, Bitcoin Cash has been the most volatile investment in the top 10 cryptocurrencies, and its hard fork away from Bitcoin means that its users might continue to stray away from its original place and technology. Litecoin should emerge as the alternative to Bitcoin, not Cash.
Crypto investor, Tuur Demeester, predicted a bull run by Litecoin with BitCoinCash hitting its high on August 19th, a sell off was imminent:
Due to its similarities to bitcoin in terms of structure, monetary policy and philosophy, Litecoin has been considered as a hedge investment tool against Bitcoin’s volatility for awhile.
There’s good reason to think that Bitcoin will continue to see its price rise as more people and money are brought into this new industry. But as adoption comes, it might not serve as the best use case currency. Litecoin has the opportunity to emerge as that option, and Bitcoin and crypto investors at large need to take notice.
Disclosure: I am/we are long LITECOIN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.