Introduction
Since it launched in 2011, Litecoin (LTC) is one of the oldest and most popular cryptocurrencies in the world. It has quickly become one of the most prominent projects among Bitcoin alternatives.
While Bitcoin is often viewed as a store of value, Litecoin is branded as a peer-to-peer payment system that can be used to send and receive money seamlessly without any intermediaries.
Litecoin is often referred to as the “silver to Bitcoin’s gold” because its codebase is a fork of Bitcoin. Many investors prefer Litecoin as a currency because of its faster transaction confirmation times and lower transaction costs.
So, is Litecoin a good investment? In this article, we’ll examine some reasons why you might consider investing in this digital currency.
Litecoin investing: Is it safe?
As with any investment, Litecoin is not without the risk of losing money, especially in a volatile market like the cryptocurrency market. The price could go up or down depending on developments in the cryptocurrency market and/or in other markets around the world.
This has been seen recently as Litecoin and many other cryptocurrencies saw their value go down by more than 80% from their all-time high in 2022.
Unlike shares in a company, the value of digital currencies is not derived from any fundamental calculations (like cash flows and profit margins) but through supply and demand.
The demand for Litecoin comes from its users. This gives Litecoin more potential than many other digital currencies because its value is based on how the currency is being used rather than how it’s perceived by investors.
Currently, there are well over 300 merchants that accept LTC as payment, including popular names like Amazon and Paypal. This gives investors a sense of confidence in Litecoin (LTC) as real-world use cases for this cryptocurrency are being identified every day.
At the time of writing, there are over 57 billion LTC in circulation out of a total supply of 84 million LTC. There will be no more Litecoin mining after the year 2142 because all 84 million coins will have been created by that time.
The fact that new coins cannot be mined means that they are designed to appreciate in value over time as demand increases, which is not the case for fiat currencies, as they can be printed at will. Since its launch in 2011, this has proven true, as the price per LTC has risen from less than $4 to over $358 in late 2017.
So far, Litecoin has increased in value by more than 5000%. So, if you invested $100 in Litecoin (LTC) in 2012, it would be worth over $12,000 by 2018. However, the 12,000 may be down by 80% as a result of the recent market crash in 2022.
Then there is the subject of Litecoin halving, which is planned to happen once every 840,000 blocks (every four years) until the network’s maximum supply of 84 million Litecoins has been produced.
Halving cuts in half Litecoin’s inflation rate and the rate at which new Litecoins enter circulation. During the halving, traders and investors should anticipate significant boom and bust cycles, which have concluded with higher prices than before the event.
Litecoin has had a challenging year in the market, made much more difficult by its close correlation to Bitcoin, which caused it to suffer tremendously when Bitcoin entered its most recent bear phase.
Some analysts claim that a Litecoin rebound is not imminent because of the reductions experienced over the last six months, which suggests that traders have already accounted for the supply drop.
Therefore, while Litecoin’s halving can affect the coin’s value—at least in the short term—the developments in the larger cryptocurrency market are more significant when attempting to predict its price.
Is it a good idea to invest in Litecoin?
Overall, Litecoin (LTC) seems to be an attractive investment as it has a long-standing history of solid performance. The price has already appreciated significantly in the past, and it could happen again when the halving occurs.
While the cryptocurrency is not without its risks and there are significant uncertainties regarding Litecoin, other factors make it an attractive investment.
The following is a list of reasons why you might consider investing in this digital currency:
Security
For most investors and traders, security is one of the most important factors when looking at digital currencies to invest in. As with any cryptocurrency, Litecoin uses cryptography to secure transactions and increase its overall security.
The same hashing algorithm (SHA-256) is used to mine all the currencies on the market, including Bitcoin, Ethereum, and Zcash.
The fact that Litecoin is a fork of Bitcoin means it has inherited its security from its original protocol. However, there are other elements of Litecoin’s blockchain that make it even more secure than Bitcoin.
The Litecoin blockchain runs on a proof-of-work model, but uses different algorithms for mining coins and verifying transactions.
This means that miners use different computers to mine LTC instead of using SHA-256 ASICs (large machines with high computing power) as they do with Bitcoin.
Exchanges
Litecoin is available on many exchanges and can be traded with US dollars or various other currencies all over the world at a very low fee (0.1%) for sellers.
Its liquidity has grown significantly over the years, which makes it a cryptocurrency with a broad audience of traders and investors.
Market Cycle
Litecoin (LTC) is one of the oldest cryptocurrencies on the market, which means that its history has gone through all the market cycles experienced by other cryptocurrencies on this list.
In 2020 and 2021, LTC had great years as it rose in value from around $42 to more than $377 by December 2021. This was followed by a substantial correction and consolidation in 2021, which was similar to what happened with Bitcoin and Ethereum during that time.
Community
While Litecoin isn’t nearly as widely used as Bitcoin, it still has a large and active development community.
They are always working on new technologies and upgrades to the network, which means that this cryptocurrency is constantly evolving.
It also means that Litecoin has already gone through some of the growing pains experienced by other cryptocurrencies.
Pros and Cons
Before investing in any asset, it is essential to assess the advantages and disadvantages because they will have an impact on the asset’s performance over the long run.
The following is a list of pros and cons that traders and investors should be aware of before buying Litecoin.
Pros
- Litecoin has low transaction costs.
- It is faster to use than Bitcoin.
- It is reliable and has stood the test of time.
Cons
- It is not completely decentralized.
- Litecoin has a less active community than some other cryptocurrencies, so it may not be as well-supported in the future.
- Although Litecoin enjoys advantages over Bitcoin, it also faces disadvantages, such as lower brand recognition and higher volatility.
- No unique utility.
- Low volume and poor market sentiment.
Different ways of investing in Litecoin
There are different ways of investing in cryptocurrencies, and Litecoin is no exception. While there are many similarities between the various investment strategies, each has its own strengths and weaknesses.
The following methods may be used to invest in Litecoin (LTC):
Buy and Hold
This is the easiest way to invest in cryptocurrencies, where investors or traders purchase them through an exchange with a fiat currency or a digital currency like Bitcoin, Ethereum, or a stablecoin like Tether (USDT).
This method allows you to start trading Litecoin quickly and fairly easily. It is also recommended for beginners who are interested in making strides in the cryptocurrency market.
Trading
This method that has grown to be very popular recently, where investors purchase assets in an attempt to make short-term profits.
There are two main methods of trading: spot trading and derivatives trading. In spot trading, investors purchase assets at low prices and sell them when the price rises. This is the basic form of trading, which is often referred to as the “buy low, sell high” strategy in the financial markets.
For example, if Litecoin trades at $40, but you believe it will eventually be worth $65 in the future, then you could buy Litecoin for $65 and sell it for $85.
Whereas, traders in the derivatives or futures markets employ the idea of leverage to maximize profits on their investments.
When investing at a current price of $65, for instance, you can increase your investment by 10 times using leverage and profit 10 times as much. Alternately, you might short Litecoin by purchasing it at the current price and selling it when it drops in value in the hopes of profiting from the price differential.
By taking this approach, traders can build up larger profits if they correctly predict that coins are set to rise over time. This is a more risky approach as money is easily lost through high volatility in the market.
Staking
This involves storing your coins in an online wallet for a certain amount of time. While you aren’t doing anything else with them, your coins can generate rewards for you by verifying transactions on the blockchain uninterrupted by staking them. The reward is determined by the number of coins you stake.
How much should you invest in Litecoin?
It’s important to remember that all cryptocurrencies are built on an extremely volatile market, and the price of Litecoin (LTC) is no exception.
Traditional investment wisdom notes that investors should never invest more than they can afford to lose.
Cryptocurrencies are a very new form of asset, which makes them extremely risky from an investment standpoint. While some investors have made millions from their investments, many people have also lost significant amounts of money investing in them.
As long as the market remains new, these risks will likely continue to exist for a long time until they become mainstream investments.
Expert predictions on Litecoin
Note: These predictions are not financial advice, but rather speculations from popular economic analysts. They are not financial advice to be followed, and they should only serve as a guideline for your future choices.
There have been several analysts weighing in on whether Litecoin will survive or thrive eventually. Some are bullish and some are bearish. For example, Trading Beast predicts that LTC will trade within the $85-$117 range in 2024, whereas, priceprediction.net takes a different view, suggesting that the price will plummet to $27 by December 2024.
Other notable experts, such as Dan Gambardello and Penguin Capital, believe that the coin will reach as high as $1000 by the end of the decade.
Conclusion
Litecoin has seen some significant price fluctuations over the course of its lifetime, but it is still relevant in the cryptocurrency market. While it may not be as popular as it was in the early stages, it still has a wide following and a dedicated development team.
Over time, Litecoin is likely to grow as smart money comes into the market and more merchants start adopting it for payments. For example, Litecoin has already been used recently by Starbucks and Twitch for payments, which will help push the adoption rate forward.
