September 8, 2017    5 minute read

Litecoin: Bitcoin’s Next Big Rival?

Worthy Competitor    September 8, 2017    5 minute read

Litecoin: Bitcoin’s Next Big Rival?

Many investors getting involved in the cryptocurrency market right now are chasing short-term momentum. People hear stories of how $500 worth of Bitcoin bought some five years ago is now worth $250,000. Hence, many people that missed the initial Bitcoin rush are now looking for the next potential blockbuster cryptocurrency that will turn them into overnight millionaires. There is now an explosion of alt coins in the cryptocurrency industry and almost everyone with an idea of how blockchain works is planning an ICO for a new type of cyber currency.

However, chasing the next big thing in cryptocurrencies is mostly an endless journey that may yield the occasional winner, but lots of losers. If ones wants to avoid the emotional rollercoaster ride that short-term cryptocurrency traders experience, one should seriously consider conducting due diligence to uncover sound cryptocurrencies that can be bought and held as a long-term investment.

Bitcoin VS Litecoin

Litecoin is to Bitcoin what silver is to gold. Both silver and gold are precious metals, but silver is almost always in the shadow of gold – except for the fact that silver’s relative cheapness gives it a higher form of liquidity over gold. When comparing stocks, investors have the benefit of using time-tested parameters such as EPS, EBITDA, and Revenue among others. However, in comparing cryptocurrencies, one might need to rely on similarities and differences and look at how such differences can translate into a differentiating factor for success.

In terms of differentiation, Litecoin payments are processed and confirmed at a significantly faster pace than Bitcoin transactions. Block generation time in the Bitcoin blockchain is 10 minutes whereas the generation takes 2.5 minutes on the Litecoin blockchain.

Another point of differentiation is that Litecoin is more adaptive to progressive change than Bitcoin. For instance, Litecoin initiated SegWIt to improve blocksize and increase transaction speed much before the Bitcoin community started talking about the need to upgrade blocksize. In addition, the fact that Litecoin is built on Bitcoin’s code makes it easy for the cryptocurrency to piggyback on developments and improvements in the Bitcoin network

 

Litecoin: Missing the Last Cryptocurrency Boom

The main reason Litecoin missed the cryptocurrency boom that turned Bitcoin into a household name on Wall Street is that its founders made the mistake of not being aggressive in selling the Litecoin brand. Litecoin invariably came to be known as a Bitcoin wannabe, (a Bitcoin clone at best) and investors simply had no reason to bet on Litecoin when Bitcoin was already hogging the limelight.

More so, Bitcoin has delivered impressive results on Wall Street; thus, Litecoin had an uphill task to attract market interest.

Granted, Bitcoin and Litecoin are built on similar technology, and they both seek to displace fiat currencies; however, Litecoin has some strong fundamental differences that are enough to make it stand and hold its own place (albeit on a slightly lower pedestal than Bitcoin). Below are three reasons investors should start considering increasing their Litecoin investments.

Undervalued

The first reason one should start considering investing in Litecoin is that it is massively undervalued relative to Bitcoin, and in this undervaluation lies massive opportunity. Bitcoin was created with a cap of 21 million coins to be mined, while Litecoin has a cap of 84 million. Hence, the supply of Litecoin is four times greater than the supply of Bitcoin and Bitcoin should, theoretically, always be worth four times more than Litecoin.

Both Bitcoin and Litecoin are built on similar codes and blockchain technology, and both cryptocurrencies are deflationary. In essence, the cap on the volumes of Bitcoin and Litecoin that can be mined suggests that the market value of the currencies will continue to rise as their market demand soars.

However, Bitcoin is currently trading up around $4,595.40 per BTC. Litecoin is nowhere near a quarter of that price as it trades up around $77.97 per LTC. Hence, the current state of the market that makes Litecoin trade at a fraction of Bitcoin’s price is simply illogical.

It may be somewhat too early to judge whether Bitcoin is overvalued or not, since there are qualifying benchmarks for its performance.

Potential to Outperform Bitcoin?

The second reason one could seriously consider investing in Litecoin is that it is starting to build up momentum for a market boom. Many investors are impressed with the fact that Bitcoin is up more than 400% to $4,595 trading price in the year-to-date period. The uptrend in Bitcoin is particularly interesting when one considers the fact that Bitcoin soared from a $1,018 price on January 2nd, to its current trading price above $4,500.

However, while the financial media is fixated on Bitcoin, a fact easily overlooked is that Litecoin has posted exponentially larger gains than Bitcoin this year. From a trading price of $4.42 on January 2nd, Litecoin has soared more than 1,664% to its current trading price of $77.97. Hence, while the price of Litecoin seems to be meagre compared to the price of Bitcoin, Litecoin has shown an impressive ability to outperform Bitcoin in terms of price gains.

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