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Despite the recent decline in price, Litecoin (CCC:LTC-USD) has been one of the strongest cryptos of 2021. So far for the year, LTC is up over 60%.
Cryptocurrencies might feel like the hot new trend in investing, similar to marijuana stocks or electric vehicle companies. And indeed, risk-averse investors may find the volatility of digital currencies too much to bear.
But for young investors with time on their sides, short-term volatility matters a lot less than long-term potential. And make no mistake, Litecoin has a lot of long-term potential. With a market capitalization around $13.6 billion, LTC-USD is currently No. 11 among thousands of cryptos.
By comparison, market caps of several other cryptos and stocks in different industries are:
- Bitcoin (CCC:BTC-USD) — market cap of $735 billion, and down 0.3% YTD;
- Ethereum (CCC:ETH-USD) — market cap of $316 billion, and up 122% YTD;
- Cardano (CCC:ADA-USD) — market cap of $56 billion, and up 492% YTD;
- Polkadot (CCC:DOT-USD) — market cap of $26 billion, and up 192% YTD;
- Albertsons (NYSE:ACI) — market cap of $8.7 billion, and up 6.5% YTD;
- Ford Motor (NYSE:F) — market cap of $49.5 billion, and up 41% YTD;
- Kinross Gold (NYSE: KGC) — market cap of $10.3 billion, and up 11% YTD;
- Nokia (NYSE:NOK) — market cap of $29 billion, and up 30% YTD.
This short table above shows us how far the crypto space has grown in the past decade, taking over the size of some of the established companies listed on the Big Board.
Litecoin’s management recently noted, “There has never been so much capital confidence invested into the network and other hard data metrics such as transferred values and transaction numbers show usage is rising. These numbers suggest a fundamental support of these valuations and indicate this is not just speculation.”
Today’s article will discuss what to expect from Litecoin in the rest of the year, especially given pressure on cryptos in the second half of May. It is likely that most altcoins will take a breather in the coming days. However, if you are a long-term investor whose risk/return profile allows for buying cryptos, you could consider investing in LTC around these levels.
Litecoin vs. Bitcoin
Charlie Lee, former Google’s Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) set up Litecoin in 2011. As a Bitcoin-derived protocol it shares many of the features of Bitcoin. Lee’s focus was speed, efficiency and wider distribution than Bitcoin. Thus, Lee increased the total supply and changed the speed at which new blocks are added to the blockchain.
According to research by Neil Gandal of Tel Aviv University and Hanna Hałaburda of Bank of Canada, which is Canada’s central bank, “Litecoin will generate four times as many coins (84 million), and the transactions are added to the blockchain four times faster than Bitcoin (2.5 minutes against Bitcoin’s 10 minutes).”
Mining a Litecoin is much faster than mining Bitcoin. Litecoin’s speedy transactions have provided tailwinds for growth.
In March, PayPal (NASDAQ:PYPL) launched “Checkout with Crypto.” Now, U.S. based PYPL users can pay with Bitcoin, Litecoin, Ethereum, and Bitcoin Cash (CCC:BCH-USD). Mastercard (NYSE:MA) and Visa (NYSE:V) have also taken steps to incorporate cryptos into their payment platforms. Understandably, such an ‘endorsement’ by leading companies in the digital payment space, is reinforcing bullish momentum for altcoins, including Litecoin.
Like Bitcoin, LTC also uses a proof-of-work (PoW) algorithm “for preventing double-spends.” However, PoW is not eco-friendly as it consumes significant energy to produce a single token. Believers in LTC are hoping that it will soon shift to a proof-of-stake algorithm so that it becomes more sustainable.
The effect of cryptos on the environment has become a hot topic of late. Elon Musk, CEO of Tesla (NASDAQ:TSLA) has recently tweeted that the company will no longer accept Bitcoin as a form of payment. Since then, investors have hit the “sell” button in BTC-USD as well as in other altcoins. We’re likely to hear more about the environmental impact of cryptocurrencies in the coming months.
The Bottom Line on LTC
Despite the recent profit-taking in altcoins including LTC, growth predictions for Litecoin are mostly optimistic. The demand for digital assets is steadily increasing.
However, its price is highly correlated with the price of Bitcoin. Therefore, short-term volatility is to be expected. But buy-and-hold investors could regard declines in price as a good opportunity to buy LTC for the long run.
Those investors who are looking for a fund that invests in LTC might want to do further due diligence on the Grayscale Litecoin Trust (OTCMKTS:LTCN).
On the date of publication, Tezcan Gecgil is both long and short GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.