Litecoin (LTC) Fundamental Analysis

Since the emerging crypto asset class is much like venture capital with liquidity, performing a quick market size analysis can provide insights into potential fundamental asset value.

What is Litecoin (LTC)?

Litecoin (LTC) is a global decentralized cryptocurrency. Litecoin was an early clone of Bitcoin, and is widely accepted in many places where Bitcoin is accepted. Litecoin has been known in some circles as the “silver to Bitcoin’s gold”. As a peer-to-peer cryptocurrency, Litecoin can and is used to transact goods and services without the need for intermediaries.

Recently Litecoin founder and foundation Managing Director, Charlie Lee, has announced some interesting strategic moves. Litecoin is positioning itself in the payments space and will likely compete head on with Bitcoin Cash. Since the Bitcoin Cash community is at odds with the Bitcoin community, Litecoin may be successful in positioning itself as the “silver to Bitcoin’s gold” (complimentary currency).

Questions to Consider when Investing

  1. Is there a published whitepaper? 

No, but the asset has a long history in the space (one of the oldest) … neutral

  1. Is there a detailed development road map? 

Yes, the technology is in use…positive

  1. Does it use an open, public blockchain, and is the code published? 

Yes…positive

     4.  How strong is the technology’s differentiator (Strong, Mediocre, Weak)? 

Mediocre, known as a complimentary cryptocurrency to Bitcoin…neutral

      5.  How competitive is the industry the asset is entering (Strong, Mediocre, Weak)? 

Strong…negative

Price Target:

Assuming:

  1. Litecoin survives potential regulatory and technological hurdles.
  2. Litecoin is adopted as an alternative investment similar to Silver.
  3. Litecoin and Bitcoin achieve a price ratio similar to the 20thcentury Silver to Gold ratio of 47:1, in the next 2 years.
  4. Bitcoin Cash (BCH) does not take the “digital silver” investment thesis from Litecoin (LTC).
  5. A 30% discount rate is used to bring future price targets (2 years in this report) to today’s dollar values. Although 30% is significantly higher than the current risk free rate, crypto assets must be discounted significantly to account for risk.

Litecoin is a decentralized cryptocurrency complimentary to Bitcoin. Due to being a peer-to-peer technology without a central organization controlling its supply (which is set to a specific finite amount), Litecoin is independent of banks and the nation state unlike fiat currencies. Therefore, Litecoin does not have the risk of being debased through policies such as “Quantitative Easing” (QE). These are many of the same advantages of Bitcoin. Bitcoin has become the premier cryptocurrency, while Litecoin is viewed as similar but not as sought after. If Bitcoin is “digital gold”, then Litecoin is “digital silver”. As such we can apply the historic Silver to Gold ratio, to Litecoin and Bitcoin in order to build a price target for Litecoin.

Given the assumptions (above) the 2-year Litecoin (LTC) price target is given below:

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