Litecoin is the coin for payment and transfers in the crypto world.
Bitcoin as the investment we save and Litecoin the value we bring in our wallet and let in our bank account.
Litecoin takes advantage of Bitcoin advances as the codes are almost similar. Also, Litecoin works as a laboratory for new inventions and upgrades, such as privacy.
Great competition and risk comes from new stablecoins as USDCoin. Especially when we think about this concept of money for short term expenses. It is important to see how this will play during this year. Stablecoins may suffer from high fees of smart contract platforms, but if it is somehow controlled it could have an impact on Litecoin value. The problem for smart contract platforms is not only the fee amount but also its unpredictability. It is interesting to carefully observe the advances of Solana, Algorand and Ethereum in this field.
Litecoin is linked to Bitcoin value. It is the coin for payments and transfers for Bitcoin users and crypto companies. As Bitcoin grows in users and value, greater tend to be the value of Litecoin. Due to this high correlation, it is not possible to analyze Litecoin value isolated from Bitcoin. In the last letter, you can find my view on Bitcoin valuation.
Value Drivers
More Transactions and Transfers: the expansion of debit and credit cards will solve the problem of retail purchases, but the need for transfers between accounts can be solved with Litecoin low transaction fees. Transactions tend to increase when the Bitcoin network is overheated and bitcoin average transaction fees are high.
Innovation: privacy feature is being developed and will be launched in 2021. Considering Litecoin purpose of being a crypto for payments and transfers this is an important feature.
Expansion of Visa crypto debit and credit cards in partnership with Coinbase, Binance and Ternio (Litecoin Card) and many other crypto companies → It is an easy and costless way to convert crypto in daily purchases and it is a trend just starting now (coinbase card launched in October/2020)
More accessible to end users (eg.: Paypal, Venmo, Visa)
Subscribe below and receive deep crypto analysis in your email every 1-3weeks. Check your spam inbox for next letters.
Risks
Competition: other currencies working as means of payment and transfer in a more efficient way (eg.: bitcoin cash, stablecoins or tokens from smart contract platforms). This market is huge, is growing fast and we can expect many players will have a piece of it. I think stablecoins such as USDCoin can represent a relevant part of this market.
Recession: impact all the assets and trigger a flight to safety (today is the US dollar).
Technology: some problem with network health or innovations that do not work as planned.
Custody: losing of LTC because of an underestimation of these risks.
Competitive Advantages
The entry barriers of Litecoin are not so big as of Bitcoin.
Lindy Effect: Litecoin is 10 years old and one of the oldest in the crypto world, so it is more tested and validated than newer ones. After many downsides as 2014 and 2018, the community of users, developers and miners survived.
Network effect (more users, more value of the network): miners bringing more safety to the network, more liquidity provided for trading, companies in the ecosystem offering more services with Litecoin (eg.: Paypal, Visa). The network effects are associated with scale gains, which increase the substitution cost of the platform.
Team and Community
The Litecoin community seems to have less internal divisions than Bitcoin, which is understandable due to the size of Bitcoin. Litecoin developers continue to work on innovation as the privacy feature MimbleWimble.
Price
In contrast to Bitcoin, we do not have so many reliable onchain analysis and information about Litecoin. Because of this, we can follow Bitcoin valuation metrics and the relation between Litecoin/Bitcoin market cap. It is better to use here market cap relation and not price, because as coin supplies are different, analyzing price can be misleading through time.
In the last 4 years, this relation varies from 1 to 6%. This can mainly be influenced by a decrease in Bitcoin average transaction fee and the presence of other competitors such as Tether, USDCoin and Bitcoin Cash.
As a coin for payments and transfers, the two main metrics to watch are average transaction fee from “competitors” (Bitcoin, Ethereum, Bitcoin Cash, Ehtereum, USDCoin and Tether) and the number of transactions in Litecoin network. This is a good indicador for upsides and drops in Litecoin price. When Bitcoin’s network gets saturated, you see more people moving into Litecoin.
Source: https://bitinfocharts.com/comparison/bitcoin-transactionfees.html
Source: Glassnode
The Litecoin number of transactions is very correlated to Bitcoin average transaction fee and can indicate price movements. Let`s see If the MimbleWimble feature will change this dynamics somehow. This feature will be released for testing on March/21. How this innovation can enhance Litecoin value for transactions with Privacy? The mktcap of privacy coins as Zcash, Monero and Dash is around US$ 4,8 billions.
On the other hand, now we have stablecoins that also could provide transactions with less fees. It is important to follow the transaction`s fee from stablecoins and the increase in its adoption, specially when using Solana and Algorand networks.
For today, to withdraw money from Binance, they charge US$ 0,15 for LTC, US$ 12 for UDSCoin, US$ 5 for USDT, US$ 14 for BTC and US$ 0,43 for BCH. So LTC is highly competitive now. (https://withdrawalfees.com/coins)
It is worth to note that the interest in Litecoin still low comparing to the peak in 2017.
Considering:
Bitcoin average transaction fee is around US$ 17, Ethereum is around US$ 8 and both may increase with the huge demand coming
Litecoin average transaction fee is around US$ 0.02
The mkt cap relation Litecoin to Bitcoin is around 1,5%
It seems to be a good time to also have a portion of Litecoin in the portfolio.
Please feel free to leave your comments and feedback below. See you in the next letter!
Subscribe below and receive deep crypto analysis in your email every 1-3weeks. Check your spam inbox for next letters.
I also invite you to join us in Telegram to receive the alerts of the following letters: https://t.me/joinchat/U9Zn95egLZ3RaQDS
Already a subscriber, If you liked the post help us sharing it.
Really Helpful Write-Up!