Litecoin (CCC:LTC-USD) is one of the original big cryptocurrencies, founded by Charlie Lee way back in 2011 as a peer-to-peer (P2P) coin. This makes it one of the first real competitors to Bitcoin (CCC:BTC-USD). Indeed, Lee created Litecoin using many of the same ideas as BTC, but designed it to be more efficient and useful in everyday transactions. Bitcoin, as investors have realized, can conversely be quite clunky for small purchases.
Litecoin was a quick success. Its price surged from $3 to over $35 in 2013. Then it died down, retreating back to the $3 to $5 range for several years. However, it woke up again in 2016. By the following year, it had soared to the jaw-dropping $350 level.
Of course, even after that, it wasn’t smooth sailing. With the ensuing crypto crash, Litecoin fell back to $40, then rocketed once again to prices over $400, briefly topping its 2017 high. Today, the recent correction hasn’t spared LTC, though. It’s now back to just under $200.
So, here’s what you should do with Litecoin as we move further into 2021.
Litecoin: Efficiency Could Pay Dividends
Litecoin has several key differences from Bitcoin. After all, Lee created Litecoin with the specific intention of improving on BTC’s framework.
For one, Litecoin has a faster block time, generating rewards for miners every 2.5 minutes as opposed to 10 minutes. This allows for faster transaction times and much higher capacity on its network for payments and transactions.
Additionally, LTC’s mining set-up differs. By using a different algorithm, Litecoin favors mining via graphics cards rather than Bitcoin’s processor-intensive layout. Regardless, as the value has soared, it has also become difficult to mine Litecoin on ordinary computers. That has reduced the benefits to some degree. Still, LTC’s backers can make some credible claims of having a more efficient platform than BTC.
This potential advantage came into focus earlier this month, when Elon Musk lashed out at the high energy intensity of Bitcoin. Tesla (NASDAQ:TSLA) abruptly stopped accepting Bitcoin for vehicle payments while Musk warned of Bitcoin’s excessive usage of electricity, particularly from the coal industry. This has created a potential opening for Litecoin and other efficiency-focused alternatives to take share from Bitcoin.
Where’s the Market Adoption?
As you can tell, Litecoin has so much going for it. It’s a decade old now and has been listed on major cryptocurrency exchanges like Coinbase (NASDAQ:COIN) for ages. It’s founder, Charlie Lee, is also a well-known figure in the crypto world. Plus, its price even soared in the first big cryptocurrency bull run, back in 2017.
But this also means that Litecoin has had plenty of chances to make a footprint. And yet, it hasn’t gotten that much widespread acceptance. In fact, the coin boasts relatively few big-name merchants or other partnerships, despite being a crypto ostensibly designed around ease-of-use for payments.
Overall, Litecoin is down to number 15 overall in the crypto market-capitalization rankings. That’s not bad, by any means, but LTC spent years in the top five. Now, it’s being surpassed by an increasing number of projects with more dynamic outlooks.
True, Litecoin still has folks trading it based on its brand name. But cryptos evolve over time. It’s far from certain that LTC will continue to stand out in this shifting ecosystem.
Right now, Litecoin is old news in the cryptocurrency community. On the one hand, that’s something of an advantage. People have heard of it and many exchanges list it. There’s some remaining first-mover advantage there.
On the other hand, though, LTC doesn’t have the same appeal as newer, more promising projects. At some point, this name needs to gain adoption or it will fade.
LTC barely made a new all-time high this year before crashing. That’s a woeful performance, compared to other legacy coins like Bitcoin, Ethereum (CCC:ETH-USD) and “jokecoin” Dogecoin (CCC:DOGE-USD). All three of these names exceeded their previous peaks to dramatic degrees.
Arguably, some of the fault lies with Lee himself. He infamously sold or donated all of his Litecoin back in 2017, when the crypto had its first big run-up. The price of LTC collapsed shortly after Lee’s sales. With the founder cashing out and the currency failing to keep up with new rivals, it’s no wonder that Litecoin has underperformed in recent years.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.