Litecoin (CCC:LTC-USD) is a popular cryptocurrency that looks to rebound before the end of the year. According to Coinmarketcap.com Litecoin is the 14th largest crypto in the world, with a $8.7 billion market capitalization. It is likely to mimic Bitcoin, the largest crypto, as it rebounds later this year.
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In fact, Litecoin is now up by 3.4% as of July 8, since it ended last year at $126.23 and is now at $130.48. It has dropped significantly (-66.3%) from its peak. According to Yahoo! Finance, its peak was on May 8 at $386.45. However, there is reason to believe that Litecoin could rebound to its former highs.
Reasons For Optimism
For one, Litecoin seems to have reached a trough in its price action. For example, it hit a recent low at $119.60 on June 21. Since then it has rebounded 9% to $130.48. It’s always possible that LTC could retouch the bottom, but at this point, that does not seem likely.
In addition, LTC has a fairly high correlation with Bitcoin (CCC:BTC-USD) and other major cryptocurrencies. When they are at lows, Litecoin tends to be at a low, and vice versa. Therefore, if the prospects for Bitcoin start to turn around, expect to see the same with Litecoin.
This is one of the reasons why Litecoin is also known as the “digital silver” to Bitcoin, seen as digital gold. It shares many of the same features as Bitcoin, except its higher price.
Another reason for optimism is what some professionals call “forming a base.” They believe that Bitcoin, and by extension, other major cryptos like LTC, have formed a recent low amid investor pessimism. This is from a spate of negative news on cryptos in general. Often after that happens, cryptos start to gain sustained upward momentum.
Litecoin’s Standout Features
Litecoin has been around a long time. Launched in 2011, the crypto was intended to focus on peer-to-peer (P2P) transactions. LTC’s founder, Charlie Lee, is focused on making Litecoin a better “cryptocurrency for payments based on blockchain technology.” Lee also wants Litecoin to have faster processing times for its transactions than Bitcoin.
As a result, Litecoin tends to be a favorite for institutional investors. For example, at one point this spring Grayscale Investments, a major institutional and ETF investment firm, was buying up 80% of all the Litecoin mining output during February.
Another major feature of Litecoin is that its supply is not in a squeeze like at Bitcoin. For example, Bitcoin can only have 21 million coins outstanding. Right now, according to Coingecko, there are 18.751,031 million BTC tokens circulating in its supply. That implies that its float represents 89.3% of its total possible supply.
But Litecoin has 66.752 million LTC tokens circulating out of its total 84 million possible supply. That implies that its float represents just 79.5% of its total supply or 9.8 percentage points lower. So there is much less price pressure, about 11% less (i.e., 9.78% / 89.3%), on its circulating float.
However, that also implies that once Litecoin’s float becomes a larger percentage of its total supply, its upward price pressure will increase. This will occur as more and more Litecoin tokens are mined.
What To Do With Litecoin
Now is probably a good time to start accumulating LTC while it is at a low point. I have shown that there are some good reasons to start believing that this crypto could stage a recovery.
However, keep in mind that the correlation with Bitcoin is likely to highly influence the price action at Litecoin. However, to buy one Bitcoin token costs over $34,000. But to buy one LTC token it only costs $130 or so. So, assuming Litecoin will follow the same price direction as Bitcoin, it is simply easier and cheaper to buy Litecoin.
On the date of publication, Mark R. Hake held a long position in Bitcoin but not any other security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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