Founded in 2011 by Charlie Lee as a peer-to-peer (P2P) coin, Litecoin (CCC:LTC-USD) typically gets second billing compared to the more famous Bitcoin (CCC:BTC-USD). Yet, I don’t believe that cryptocurrency traders should ignore Litecoin.
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First of all, I sometimes see folks loading up one just one or two tokens. Just like a stock portfolio should be diversified, a cryptocurrency account should also have a variety of coins.
This doesn’t mean that you should just put a bunch of random crypto coins in your account. Consider what makes each asset different from the others, and keep all position sizes moderate so that you’re not over-leveraged.
At the same time, keep an eye on Bitcoin because it’s still the “mother ship” of cryptocurrencies. Wherever it goes, other coins are likely to follow.
Analyzing the Litecoin Price
InvestorPlace contributor Chris Markoch once wrote that the correlation coefficient of Litecoin to Bitcoin was 0.83.
In other words, the price movements of the two currencies are similar, much of the time.
And while I can’t prove this, I’m going to assume that Bitcoin is leading Litecoin, and not the other way around.
Consider this: Bitcoin peaked at $64,863.10 on April 13, and then Litecoin peaked at $412.96 on May 9.
This lends credence to the idea that Bitcoin’s leading and Litecoin’s following.
In any case, after the crypto crash of May, the LTC price settled at around $174 on June 5. Stocks tend to move slowly during the summer, but somehow I suspect that cryptocurrencies don’t follow those types of rules.
Therefore, traders shouldn’t let their guards up. Keep a close watch on the Litecoin price and feel free to take advantage of any 20%-or-greater price dips that may occur.
Watch Those Tweets
I would also advise cryptocurrency investors to stay active, or at least watchful, on social media.
If you’re able to monitor postings on Reddit boards like r/WallStreetBets, check for a surge of interest in Litecoin as a potential buy-up target.
Moreover, you’ll want to keep an eye on Elon Musk’s tweets. Like it or not, his postings have the power to move digital asset prices.
For instance, Bitcoin and Litecoin declined in tandem after Musk posted a tweet on June 3.
This particular tweet featured the hashtag #Bitcoin, a broken-heart emoticon, and a picture displaying an unhappy couple and a reference to some Linkin Park lyrics.
It might be frustrating to consider that one individual would have such a strong influence over cryptocurrency prices. But it is what it is, and traders have to respond accordingly.
A Viable Alternative
Perhaps Litecoin doesn’t get as much consideration as Bitcoin because people aren’t aware of its advantages.
For example, as InvestorPlace contributor Alex Sirois points out, Litecoin “provides transactions which process four times faster than those through” Bitcoin.
Furthermore, InvestorPlace contributor Ian Bezek observes that Litecoin generates rewards for miners every 2.5 minutes, as opposed to every ten minutes with Bitcoin.
Not only that, but Litecoin is known to be comparatively less energy intensive.
Reportedly, Litecoin has been rated at 0.12 kilowatt hours per transaction. That’s a vast improvement over Bitcoin’s whopping 707 kilowatt hours per transaction.
Given these advantages, a powerful argument could be built in favor of Litecoin as a viable alternative to Bitcoin – and a number of other cryptocurrencies, for that matter.
On top of all that, the LTC price is fairly low.
It’s not as low as some of the coins out there that cost less than a dollar, but 1 LTC is certainly more affordable than 1 BTC.
The Bottom Line
The principle of diversification doesn’t only apply to stocks. It applies to cryptocurrency portfolios, as well.
Therefore, it’s reasonable to add Litecoin to your crypto holdings, as it offers notable advantages over Bitcoin.
On the date of publication, David Moadel 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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.