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- Litecoin (LTC-USD) is struggling. LTC crypto has fallen drastically from $278 in mid-N0v. to $110 on March 17.
- Litecoin has a high correlation with Bitcoin (BTC-USD), so its turnaround will wait on a rebound in BTC crypto.
- Investors should use this period to average down into LTC crypto, especially since it’s much cheaper than Bitcoin.
Litecoin is the 21st largest cryptocurrency as ranked by Coinmarketcap.com. LTC crypto has taken a beating since peaking at $278.01 on Nov. 13. It’s now down to $110 as of this writing. From a market value of $19.2 billion, it has cratered to just $7.7 billion.
Moreover, year-to-date (YTD), Litecoin is down 27% from where it ended last year at $147.75. This is actually worse than Bitcoin, which is down about 14% from $48,000 to $41,000 as of late March 17.
Where Things Stand at Litecoin Now
Litecoin is a secure peer-to-peer-cryptocurrency platform focused solely on improving payments and monetary transactions. Right now, Litecoin is now accepted at 3,265 merchants worldwide according to Cryptwerk.com. This is up from 3,111 in October 2021 according to Cointelegraph.
Moreover, there are now 97 payment gateways using Litecoin. This includes PayPal (NASDAQ:PYPL), which allows transactions in four cryptocurrencies: Bitcoin, Ethereum (ETH-USD), Bitcoin Cash (BCH-USD), and Litecoin. Recently, PayPal decided to raise transaction fees on small transactions in these cryptos, according to Coinmarketcap.com.
This implies that the gateways using Litecoin and other crypto payment platforms find transactions below $100 unprofitable. They need to have fees higher than $2.49 (i.e., 2.49% or higher for amounts below $100). This could have a dampening effect on Litecoin’s popularity.
However, let’s keep things in perspective here. For example, to effectively do transactions in Bitcoin you have to use small fractions of the price. This dollar size effect is not as bad for LTC crypto since it trades around $110.
Another way that Litecoin is similar to and somewhat tied to Bitcoin is its proof-of-work validation system. Simply put, this means that Litecoin is still mined using electronic servers and specialized circuits called Application-Specific Integrated Circuit (ASIC) servers. This is just like at Bitcoin and is now considered environmentally unfriendly by some quarters since it requires so much electricity to do Litecoin mining.
What Investors Should Do With LTC Crypto
The truth is that Litecoin has always been known as the digital “silver” to Bitcoin’s “gold,” according to Litecoin’s founder, Charlie Lee. Investopedia says that they share the same codebase together and they tend to have “similar price movements in cryptocurrency markets, rising and falling in tandem.”
That implies that Litecoin is not likely to rebound until Bitcoin makes a sustained comeback. And Bitcoin’s movements correlate with general market movements, much more than Litecoin.
One reason for this is that Litecoin was originally founded as a way to easily scale transactions. Bitcoin is too large to allow massive transaction scaling. Litecoin was designed to do this, but that has also come at a cost. This is its lack of ability to handle smart contracts in blockchain platforms like other major currencies.
As a result, this could hold it back as other cryptos begin to rebound. Nevertheless, its core function and focus for investors as a simple means to conduct crypto transactions gives it some appeal. People know that it specializes in this one thing and that simplicity gives it some attraction.
At this point, investors who want to gain a simple form of exposure to cryptocurrency but don’t want to pay over $41,000 just to buy one token can buy LTC crypto. It acts as a sort of replacement token for Bitcoin. However, LTC crypto probably does not have the same upside and potentially has more downside than Bitcoin. Just keep that in mind when buying Litecoin.
On the date of publication, Mark Hake did not hold (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.