With a nearly 350% rise in the last year, it’s no surprise that investors are over-enthusiastic about Bitcoin (BTC). As the world’s largest cryptocurrency, BTC hit its all-time high of over $42,000 on January 9, driving investors to capitalize on the ongoing crypto bull run.
This sentiment has led the masses to huddle over Bitcoin, sending many other cryptocurrencies with a higher growth potential under the radar. Litecoin (LTC), established as an alternative to Bitcoin, has demonstrated significant potential since its origin nearly 10 years ago. Though LTC’s 175% gains over the past year seem weak compared to Bitcoin’s returns, an inside look into the fundamentals point otherwise.
Litecoin vs Bitcoin: What’s the Difference?
Developed by MIT graduate Charlie Lee nearly two years after the emergence of BTC, Litecoin is one of the most popular cryptocurrencies in the market at the moment, and is one of the biggest rivals of Bitcoin. Created to overcome the shortcomings of BTC, Litecoin enjoys several tactical advantages.
The relatively newer cryptocurrency can be mined within a shorter span of time (2.5 minutes compared to BTC’s 10 minutes) and has a 4x higher coin limit. Moreover, mining Litecoin is easier than BTC, as it uses ‘Scrypt’ algorithm as a proof of work scheme.
For reference, Bitcoin uses SHA-256, which requires higher processing power and Application Specific integrated circuits (AISCs). With the rising popularity of cryptocurrency mining across the world, LTC is likely to be more popular, given its user-friendly mining technique and rather low-end processor requirements.
Though LTC’s market capitalization is significantly lower than Bitcoin, the former has been reaching record highs, riding on the cryptocurrency frenzy. Litecoin hit its 52-week high of $181.77 on January 8, and has an average trading volume of over 11 billion. While its difficult to predict Litecoin’s price in the short-term, it is well poised to gain momentum over the long-term.
Litecoin and Coinbase IPO
Coinbase is a leading cryptocurrency broking platform in the world, facilitating purchase, sale and transfer of both Bitcoins and Litecoins, among others. As the first cryptocurrency exchange to go public, the Coinbase IPO, scheduled for February this year, is expected to accelerate the bull run.
While Coinbase currently supports over 47 cryptocurrencies on its platform, Litecoin has been one of the foremost currencies trading on the platform. Its upcoming IPO currently valued at $28 trillion, amid the ongoing crypto bull run, should allow Coinbase to expand its operations globally. Though both Bitcoin and Litecoin are expected to rally post the IPO, Litecoin’s fundamental user-friendly algorithm is well-poised to make it a bigger hit in the global markets.
Litecoin’s Journey to Success
The Decentralized Autonomous Organization (DAO) hack in 2016 led to a severe pullback for almost all cryptocurrencies, despite the hack being targeted at the Ethereum blockchain. The DAO hack exploiting the weakness of the blockchain ecosystem affected the entire digital currency industry, Litecoin being no exception. Litecoin declined more than 90% within a year since hitting its multi-year high of $375.29 in December, 2017.
Nonetheless, LTC has come a long way since then, gaining more than 680% since hitting its multi-year low of $22.82 on December 9, 2018. The cryptocurrency has gained more than 690% to date following the crash, reflecting its growth momentum.
Fast forward to 2020, the cryptocurrency industry has been on hyperdrive, with no signs of slowing down. The pandemic has acted as a tailwind for digital currency, bolstering LTC to reach new highs. This can be attributed to the weakening US- dollar amid dovish monetary policies and quantitative easing, along with internal and global socio-economic turmoil.
The $900 billion fiscal stimulus bill passed by the house of Congress and the historically low-interest rates in the wake of surging coronavirus infections and deaths, contributed to US-dollar’s downturn. This is reflected in a 7.4% decline in the US-Dollar Index over the past year.
The world’s largest currency is also facing external pressure from eastern economies such as China, which is recovering at a higher pace compared to the United States. This, combined with the internal conflict as the Biden administration comes to power has shaken investor confidence in US-dollar, increasing the demand for alternate currencies.
Also, the rising pressure on the US dollar to revive consumer spending has increased the risk of inflation in the country, forcing people to shift towards non-regulated digital currencies. This speculative demand is the driving factor behind the rising popularity of cryptocurrency, thereby facilitating Litecoin’s rally.
The current macroeconomic scenario has precipitated the growth of Litecoin over the past year. Though LTC still has a long way to go to catch to Bitcoin, it is poised to beat BTC in terms of growth potential, as the whole world adopts a positive attitude towards cryptocurrencies in this age of digitization.
However, many people believe a government crackdown on the cryptocurrency ecosystems is long overdue. Canadian businessman and angel investor Kevin O’Leary recently said in an interview that he expects federal regulators to "come down hard" on Bitcoin soon.
Governments across the world are currently focused on reviving their respective economies from the pandemic—stricken recession, which should give cryptocurrencies room to grow over the next 1 to 2 years.