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Litecoin, like any other cryptocurrency, is volatile. It depends on the different market factors for the price movements. The coin had a slow month after the active year running from March 2020.
At any other time, it would like a regular market movement. It seemed like the market was on recovery with the fiat currency economy recovering. There was the possibility of a market correction after the Defi boom. Markets that had boomed like Ethereum were suddenly going down. This could have rubbed off on Litecoin.
While those might be true, they are not the primary reason for Litecoin’s price shakeup. The main Litecoin news was the introduction of the Litecoin Trusts. The Grayscales Litecoin Trust went live mid-August and had the market fumbling.
For a long time, traders only accessed Litecoin through crypto exchanges and mining. Using these means comes with potential concerns on volatility.
The trusts were a new entrant in cryptocurrency for Litecoin. It allows traders access to Litecoin without the underlying issues.
The trusts are like any other traditional stocks. They are highly regulated and are more predictable. Most of the traders received the news with positive reactions. By the second day, the Litecoin Trusts were already making profits.
According to Arcane Research, Litecoin Trust was trading at a premium of 753%. It was beating the rates of Bitcoin Cash, which was launched the same day as Litecoin’s. It was trading at a 351% premium.
Understanding the Premium Problem
The Litecoin Trusts hit a premium of more than 1000% within the first two weeks. These values were a boost to the underlying currency. As much as the traders were buying shares, the rave helped bolster Litecoin. This was not to last.
The market realized they were paying for an unreliable premium. The trusts were outperforming the underlying assets. Arcane Research analyst raised the premium problem issue. He said the trusts are based on single assets. They should not outperform the underlying asset over time. The excess returns would be arbitraged away.
While Grayscale is a reputable investment platform, investors lost confidence. They started questioning the wild premium charges. The investors started falling over to Bitcoin and other cryptocurrencies.
Cryptocurrency market watches started fearing investors might be on the losing end. That they don’t know what exactly they are paying for.
Grayscale, on their side, confirmed they had nothing to do with the price movements. The managing director, Michael Sonnenshein, argued they have no control over the market. They only create the ability for the markets to happen with no direct control.
The main market drivers at this period were investors buying the trust. Most found it the best compensation for the lock-up period. High retail demand for crypto exposure through 401k for investors also played a role. Most at the time with few options.
The earlier boost from the Litecoin trusts saw Litecoin hit the highs of the year at $60.96. It was the same period when the trust had the highest premium. However, after the realization of an unrealistic movement, the premium started going down. The same impacted the digital currency as it started a sustained downward spiral. By the end of September, the coin was already at $46.24.
Why Litecoin Attracted the Investors
Even though launched with Bitcoin Cash the same day, Litecoin trust outperformed it. It kept on attracting investors weeks into the launch to impact the underlying asset. This is a sign of how much Litecoin is valuable.
Litecoin operates like Bitcoin. It even tops Bitcoin in transaction speeds and low cost of transactions. The features have made it popular among trades. It is so useful gaining the space of “digital silver.”
The coin has also kept its place as a top 10 cryptocurrency. It works as a reliable alternative for those looking beyond Bitcoin and fiat currency.
Litecoin Future Price Predictions
After the September slow vain gain, the coin is on a sideways market movement. It can go to either a bullish or a bearish run. The only concern, though, is the low support levels if it goes on a bear run. With the levels around $40, the currency will lose so much if it were to go down.
Still, there is a possibility of a bull run. The other currencies, like Ripple and Bitcoin, are also on the sideways market movement. The possibility of Bitcoin moving higher depends on the general market movement. At the time of writing, it has reached $49. Even though these are slight changes for a month, it is a hopeful value increase.
The coin also has several optimistic price predictions moving into the last quarter. Most experts expect the coin to finish the year strong, as it will move into the future. Some of the notable experts are Long Forecast, who expect the coin to hit $55 by the end of the year. One of its developers, John Kim, project it will hit $60 by the end of the year.
Still, some experts are quite too optimistic. DigitalCoinPrice expects Litecoin to hit $106 by the end of the year. Coin Price also pictures the coin at $124 by the end of the year.
With the possibility of a bear run, other experts are angling for a price reduction. Wallet investors predict the coin will be at $22.95 by the end of the year.
Bottom Line
Litecoin had a mixed September. The coin kept on with a bullish run starting from August. It reached the lows of $46 by mid-September. The introduction of Litecoin trusts is behind the moves.
The Litecoin trust came when American investors were looking for alternatives. The stock market was still low, while Bitcoin is quite costly. Immediately after the Grayscale Litecoin Trusts opened, they flooded it. The new entrants saw the market reach highs of 1000% premiums.
The Litecoin revamp improved the underlying coin until it became unsustainable. The market realized the trust was performing better than the underlying asset, which should not be the case. The market went on correction, making the Litecoin go on a bearish run.
Currently, at the sideways market point, the coin can either go high or low. It all depends on the general market movements.