Litecoin (LTC) is the third largest cryptocurrency, after Bitcoin (BTC) and Ethereum (ETH). It’s a decentralized, open-source payment network. In simple words, Litecoin allows you to receive, store, and send value to others.
Although similar to other cryptocurrencies, Litecoin is a lighter, faster blockchain technology, hence the name. It offers some key advantages. Let’s go over some of it’s most known features.
One major difference is the mining system. LTC relies on a scrypt (software algorithm) to mine currency, which means it’s easier for small miners to compete against the powerful computers operated by the bigger miners.
LTC transactions are much faster than BTC transactions, usually about four times as fast. This characteristic is especially important for cryptocurrency traders who work to profit from price moves instead of buying and holding the currency.
Since payments are faster and simpler, LTC transactions cost less than Bitcoin processing. Most important, the price of Litecoin has lagged behind the prices of Bitcoin and Ethereum, which suggests there may be plenty of room left for upward growth.
Room for growth
Litecoin was developed to help people avoid some of the problems associated with Bitcoin, such as overcrowding in the mining zone. The network can generate up to 84 million total LTC, compared with only 21 million currency units available through the Bitcoin system.
Most important, the market price of LTC is far lower than that of BTC. So, if you want to buy Litecoin, or if you’re thinking about investing in Litecoin, you will receive more currency units.
Experience shows that the lower-priced assets in a given market usually move in step with the values of giant players. If LTC is “silver” and BTC “gold,” then Litecoin prices should be expected to benefit from higher Bitcoin values.
Should I invest in Litecoin?
LTC and other cryptocurrencies are attracting plenty of investor interest because they’ve been rising in value. If you’re thinking about investing in Litecoin, you should take time to understand the opportunities as well as the risks.
Before figuring out how to buy LTC, the first step is to consider whether investing in Litecoin is right for you. There are several characteristics of a winning investment in any marketplace.
✓ Inefficient marketplace
✓ Under-appreciated asset type
✓ High potential return
Each individual investor tries to outperform the market average. Unfortunately, very few people who invest in traditional asset classes such as stocks and bonds are able to consistently beat those markets’ benchmarks over time.
Mature markets are usually too efficient to allow small traders to eke out profits. The giants squeeze most of the “spread” out of traditional markets.
Stock and bond markets are especially efficient because trading fueled by large institutions sucks most of the profit out of each price move before small independent investors have time to react.
The issue is that prices of assets in efficient markets already reflect all publicly-known information by the time traders learn the news.
In contrast, cryptocurrencies trade in newer marketplaces. So, they tend to be less efficient and more volatile. Most institutional investors are too big to play in this arena.
The most practical form of Litecoin investment is to trade the cryptocurrency through a regulated brokerage, instead of buying and holding LTC itself.
As an individual trader willing to invest in LTC, you can scalp the fat left untouched by giant investors.
One major reason for investing in Litecoin is that it has already grown in popularity enough to have a mature marketplace for selling or buying Litecoin. So, you’ll have more liquidity in buying LTC instead of other, lesser cryptocurrencies.
Another advantage that drives people to buy Litecoin is this currency’s under-appreciated potential for gains. After recent developments in the LTC platform, more people are now investing in Litecoin.
Still, there are many individual investors who haven’t even learned about cryptocurrencies yet. Expect the value of LTC to continue to rise as more Litecoin investors come aboard.
What drives the price of Litecoin?
First, it’s important to understand that Litecoin price is determined by many factors.
- Supply and demand
- Cost of mining (electricity, computing power, difficulty, etc.)
- Usefulness of the currency
- Media exposure and public perception
- Bitcoin price
- Technical innovation
- Regulatory compliance and legal issues
Supply and demand
The price of LTC is a result of supply and demand at any given moment. It’s easy to understand – The more people want to buy Litecoin, the higher its price will go.
Likewise, the less the total supply of cryptocurrency available for sale, the higher its price will go.
By investing in Litecoin you’ll have an opportunity to ride upward as more people become eager to buy the shrinking supply of Bitcoin.
For example, Litecoin has the potential for 84 million total currency units, while Bitcoin only has capacity for at most 21 million units.
Our planet has nearly 8 billion people, so whole Bitcoin units alone won’t be nearly enough to serve everyone who will use cryptocurrencies going forward, unless the price of individual BTC is very high.
When a low-unit cryptocurrency like Bitcoin is halved, the dwindling supply of incoming newly-mined coins has tended to cause price rises across other cryptocurrencies, too. So, when the price of BTC rises, the price of LTC often r follows quickly.
Cost of mining
Mining, storing, and administering any type of cryptocurrency costs a significant amount of money, and therefore affects its value. For example, the energy cost of securing a blockchain, especially the proof of work (POW) type, is a major operating expense.
Bitcoin consumes an enormous amount of energy, both for mining and storage. Litecoin uses much less electricity because, as a “lite” version of blockchain technology, it processes transactions about four times as quickly as Bitcoin. Faster transactions mean less energy usage, and lower costs.
Beyond the cost of electricity, another factor driving the price when you buy Litecoin is the level of difficulty in mining it. Higher blockchain security means higher mining difficulty, and of course higher cost.
Litecoin relies on a relatively “lite” POW blockchain technology that offers a good blend of speed, security, and low cost. Less energy, faster transactions, and adequate security are the reasons why people have lower costs by investing in Litecoin than in Bitcoin.
Another important factor driving the price of Litecoin is its usefulness, and its potential for growth relative to Bitcoin and other cryptocurrencies. Litecoin has reached a tipping point on the adoption curve – It’s growing faster than Bitcoin and Ethereum.
As more people use LTC for commercial transactions, it has become a focus of cryptocurrency traders who work to profit from buying Litecoin.
Still, even though the LTC marketplace is growing much faster than the more-mature BTC market, Litecoin is thinly traded when compared with Bitcoin and Ethereum. That means more opportunities for small, nimble traders.
Instead of buying Litecoin as a means of paying for merchandise or services, Individual traders can profit from short-term price movements that large institutional investors can’t touch.
Media exposure and public perception
Public perception and media reports have a major effect on the price of LTC. Each time Bitcoin has received media exposure (whether good or bad), eventually, that news has driven the public to buy Litecoin.
Most of the media coverage of new blockchain technology is focused on tokens and colored Bitcoins. At the same time, media coverage of cryptocurrencies, in general, is fueling investors’ interest in how to get Litecoin.
When Bitcoin price rises, Litecoin price usually follows. But, LTC has a built-in price advantage because of its simpler operating model – The “lite” blockchain costs less energy to secure and administer.
On the other hand, when Bitcoin’s price falls because of bad news, cryptocurrency investors migrate into Litecoin because they see it as the next rising cryptocurrency star.
Each time hackers have raided cryptocurrency exchanges like Mt. Gox, the price of BTC has tended to drop while the price of LTC rises.
When Bitcoin loyalists abandon their first currency, they often invest in Litecoin because they see better potential growth, lower costs, and fewer security risks.
That’s why a weak Bitcoin price often signals a stronger LTC price in the near future.
New technology is another reason why investors want to learn how to buy Litecoin. Among other recent innovations, Litecoin has incorporated Segregated Witness into the network. This means strong security without sacrificing speed or economy.
When Bitcoin enjoys a technological breathrough or reaches a halving milestone, its rising price draws more people to invest in LTC.
Yet, Litecoin has another, bigger advantage – It relies on a lighter, faster blockchain model which is fundamentally different from Bitcoin. It leaves plenty of room for expansion and differentiation.
Apart from the three main cryptocurrencies – Litecoin, Bitcoin, Ethereum – there is a herd of smaller currencies with a cult following. Most of them simply repackage Bitcoin code without innovation.
Regulatory compliance and legal issues
Since blockchains are public, any form of premine or instamine is quickly recognizable and will affect the price of a cryptocurrency. Premining and instamining are often used by blockchain developers to atract money from investors in smaller cryptocurencies. In contrast, people who learn how to get Litecoin can avoid Bitcoin and other cryptocurency scams that lead to dilution of value.
What is the price outlook for Litecoin?
During the recent negative market news, the price of LTC has been less affected than prices for BTC and other cryptocurrencies. This suggests that the longterm price outlook is more favorable for investors who buy Litecoin.
It has a total issue ceiling of 84 million units compared with Bitcoin’s limitation at 21 million, plus faster turnaround times and lower transaction costs. That’s why a growing community of Bitcoin ex-investors and traders are now asking like “What is Litecoin?” and “Where can I learn how to get Litecoin?”
If you want to buy Litecoin, it’s best to start looking now. The remainder of this year and beyond will probably see additional upward price moves as savvy investors migrate out of BTC and into LTC.
What do the experts say about the price of Litecoin?
Like a younger brother to Bitcoin, Litecoin has been in the shadow before, but has recently matured and grown upward rapidly. The experts are generally very positive in the outlook for LTC.
When comparing Litecoin against Bitcoin and other cryptocurrencies, the consensus among experts is generally very favorable. LTC has the advantages of faster speed, lower transaction cost, and greater availability.
Regarding the competitive future of altcoins against Bitcoin, this is just the beginning of the early days of growth in cryptocurrencies. John Zwick, Founder at CurrenceC Capital, which specializes in block-based assets, and a lifetime board member at the Bitcoin Foundation, said it best:
“I believe in Litecoin more than Bitcoin.”
How to buy Litecoin
For many people, the best way to invest in Litecoin is not to buy LTC at all. Instead, the best way to invest in Litecoin is by trading it on an exchange using a regulated broker. That way, you’ll avoid wallet hacks, exchange failures like Mt. Gox, and regulatory compliance problems such as the Bitinex token scandal.
By trading LTC through the right brokerage, you’ll avoid many of the risks of holding cryptocurrency. There are several advantages to trading LTC instead of holding the currency.
- Better access and liquidity
- No Bitcoin exchange failures
- No hacked or lost wallets
- Online trading and brokerage
- Better customer service
As mentioned elsewhere, there’s plenty of liquidity in the LTC marketplace. Also, transactions are settled quickly and at lower cost. As a result, small traders are targeting LTC for opportunities to earn fatter gains than BTC and ETC could offer.
In summary, the best strategy to profit from LTC is not to buy Litecoin, but to trade it instead.