Why does Litecoin have the potential to grow 10-20x in value?
Please note that this letter is not intended as financial advice.
On-chain Analysis
Bitcoin average transaction fee is still high around US$ 25, Ethereum is around US$ 30. Both may stay in high levels due to increasing demand and institutional investors coming.
Source: https://bitinfocharts.com/comparison/transactionfees-btc-eth-ltc.html
As a result the transfer volume in Litecoin Network is growing. The image below is extremely bullish for LTC, if it sustains this high level. In normal times, transfer volume in Litecoin Network is between US$ 100 million and US$ 200 million. Now, it is already at US$ 6 billion per day. This high use of LTC network is expected to lead to an increase in LTC price.
Source: Glassnode
The number of active addresses in the network is in steady growth since December 2020.
Source: Glassnode
The Reserve Risk metric is used to assess the confidence of long-term holders relative to the price. Reserve risk is still low when compared to the last bull cycle.
Source: Glassnode
PayPal and Venmo Opportunity
Paypal had 377 million active users as of Dec. 31. Digital wallet Venmo around 66 million users.
PayPal launched in November 2020 its crypto services, allowing users in the U.S. to buy, sell and hold Bitcoin, Ethereum, Litecoin, and Bitcoin Cash directly through PayPal. The demand for these services was greater than expected by the company and they plan the following advances in crypto service this year:
Introduce crypto service to Venmo
Enable Cryptocurrency as a funding source for purchases, allowing users to use their Cryptocurrency holdings to make purchases at its network of more than 26 million merchants
Expand this service to select global markets
The digital wallet Venmo had exponential growth and already surpassed JP Morgan in number of accounts. It plans also to integrate e-commerce features in the app this year and there is a lot of potential for growth.
Source: Ark Invest
This is good news for Bitcoin and excellent news for Litecoin, which was selected as one of Paypal cryptocurrencies. With these advances we can expect more retail investors buying litecoin. LTC has only 10% of BTC daily volume and could be more impacted for an increase in use. Moreover, LTC has more appropriate features to be used for payment and transfers than BTC.
During the year we will follow the deployment of these advances in Paypal and Venmo and see how it is affecting Litecoin Network and price. Stay with us. Subscribe to this letter below.
Innovation in the Litecoin Network
For those investing in Litecoin, it is important to understand the innovation is going to be implemented this year with MimbleWimble feature.
MimbleWimble is coming to improve Litecoin fungibility. To be fungible "1 LTC = 1 LTC" no matter the history of each LTC.
Source: https://litecoin-foundation.org/the-battle-for-sound-money/
A fungible money has privacy. This is a basic human right. It is even more important for a currency being used to payment and transfers. You do not want your competitors to see how you are spending the money of your company for example.
Privacy brings the risk of a heavy government regulation on exchanges. But the developer team were prudent and choose to implement this as an opt-in feature. The exchange will have the option to ride on MimbleWimble road with privacy or ride on the public mainchain.
Source: https://litecoin-foundation.org/the-battle-for-sound-money/
MimbleWimble not only brings opt-in privacy but also improves scalability due to its ability to compact transactions (by erasing parts of the transaction history and only keeping track of unspent coins).
This is good news for LTC and in March it will be released a test version of it.
Litecoin Social Volume
Despite the great perspective for LTC, its social volume and awareness are still low when compared with the last bull cycle. The social volume is 14% of the top reached in 2017.
Source: Google Trends
It is interesting to note that countries with weak currencies such as Venezuela we can see a continued interest for Litecoin.
Source: Google Trends
Another market to follow is the US. As Venmo launches its crypto features, including Litecoin, it can increase LTC social volume.
Source: Google Trends
In the case of Bitcoin, the social volume is 55% of the top reached in 2017.
Source: Google Trends
As LTC price increases, its social volume will increase together. LTC price will impact social volume, which in turn, will impact price.
Institutional Investor and Liquidity
The biggest fund in crypto space is Grayscale with more than US$ 40 billion under management. In the case of Grayscale Litecoin Trust, for each US$ 19 of LTC, institutional investors are paying US$ 263. In other words, they are paying a premium of 13x its current price, equivalent of US$ 2,200 per LTC.
Litecoin volume in exchange is usually 10% of BTC liquidity, and since November it is between USD 500mm and USD 3 bi. But, to attract institutional investors it needs to sustain these high volumes for a longer period of time. When this happens, we can see more institutional investors coming and a greater impact in price.
For all these reasons, it seems to be a good time to have a portion of Litecoin in the crypto portfolio. In my opinion, LTC has a high correlation with BTC, but a greater upside now.
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