Editors Note: This litecoin analysis was originally published in December of 2017. Despite the change in prices, the fundamental analysis of litecoin compared to bitcoin remains relevant.
If you’ve been following my $LTC trading analysis, you will know who I am. Back in April I noticed parabolic wormhole being formed in the fabric of the universe in which Litecoin, the ‘silver to bitcoin’s gold’ more than doubled in value over the following 48hrs as it traversed through it. But it’s not that I noticed this wormhole which was so unique — it’s that I charted it in such a ridiculous a way which took me from pleb to senior pleb status overnight.
I have analyzed many different coins but it’s when I come back to talking about Litecoin that I really get arize.
So here we are today at the same LTC/BTC price of ~.01BTC as when this wormhole was created above. Since then, the price of Litecoin in terms of USD has gone from a high of $15 to the high in the last 24h of $150. A 10x gain over 8 months.
What I’m going to show to you today however is that this was this was merely a blip of growth compared to what is about to come. I see another quantum leap that will take Litecoin from .01BTC to somewhere around .25BTC which in today’s terms brings LTC to around $3,750 each.
I know that sounds crazy and even I have struggled to come to grips with it, but once you do the math and look at the following data, the penny will drop and LTC will make a push to at least .1BTC very, very quickly. I expect it will come sooner and more surprisingly than most will be ready for.
Litecoin is considered the Silver to Bitcoin’s Gold and it was created to make up for the shortcomings in Bitcoin. As BTC grew, Charlie Lee aka @satoshilite saw the shortcomings of Bitcoin. He saw that it was not capable of being the payments coin for regular day to day usage for your average person and was becoming more of a store of value, like a digital gold. Although an excellent carrier for high value transfers, the growing success of the Bitcoin network increased fees and mining difficulty which was enough to put BTC transfers out of reach for the average person. So Litecoin was born.
What is remarkable though, more than these technical differences, one could say the true genius of Charlie, was that he decided not to compete with Bitcoin and market itself as a replacement, but to be a companion to it. It is where the Silver to Gold analogy was born and something which has proven to be one of the greatest decisions made that many only realize now after 7 years the brilliance behind this decision.
There are many comparisons between LTC and BTC as there are to silver and gold raw materials, but when it comes to the raw math of calculating their values, that’s where the comparisons end. The analogy works in terms of Litecoin being faster and better suited for payments compared to Bitcoin but the current pricing ratio of Silver to Gold does not make sense when you apply it to crypto currencies.
It’s close enough to show that a lot of uninformed money uses the analogy to determine the price. Newcomers to crypto do not yet understand the fundamentals behind the supply and they do not yet know how to analyze real world utility, and how to evaluate scarcity. Let me show you some data.
First lets start with the most basic difference which is the number of coins that will ever be created. (In crypto we call this mining in other words, minted). True cryptocurrencies that people can get behind have a limited supply, meaning, at some point a central authority like a federal reserve can’t just decide to create many more coins and decrease the value of the currency you hold.
Another essential quality a good cryptocurrency should have is that whoever made it didn’t premine or stash away a huge chunk for themselves and give themselves god status should their coin ever make it truly to critical mass adoption. Everyone knows Litecoin has no premine, just like Bitcoin, and it has a fixed supply. I challenge anybody to come up with a coin which is trusted more than Litecoin in the community. The room goes silent. You can do the same — it’s not a magic trick — no other coin holds a candle to Litecoin for having the track record it does. We trust it’s spirit. It was made by the people for the people and is following the same parabolic network effect that Bitcoin has had. Otherwise, it is quite literally one of the most boring coins in the market, yet Bitcoin relies heavily upon it and we owe great thanks to the rise of the king to Litecoin. It’s a partnership. You can’t say Bitcoin would be where it is today without the help of Litecoin.
Now let’s compare supply of Bitcoin and Litecoin.
Bitcoin will only ever have 21 million coins created. Of those, currently 16,731,775 are in circulation. 79% or so circulating right now.
Litecoin will only ever have 84 million coins created. Of those, currently 54,232,633 are in circulation. 64% or so circulating right now.
The difference? There are 4 times as many LTC as BTC that are ever going to be mined, however currently there are only about 3.2x as many LTC currently in circulation. All things created equally, if you used this indicator alone 1 BTC should be worth 3.2 to 4 times as much as 1 LTC which puts the BTC price anywhere from .25 to .31 BTC. Of course, it’s not that simple. We need to look more at utility and real world usage to understand why the price of BTC is justified (or isn’t) at 100x the price of LTC.
The other facet about supply is circulation and how strong are the hands holding what is in the supply?
When there are so many alt coins which parade more exciting features, many are surprised LTC has survived this long and why it continues to make gains. It’s simple: there are no holders like Litecoin holders. They have the strongest hands in the game. It’s the same kind of dedicated culture behind it which brought Bitcoin to where it is today.
Look at these numbers. LTC has more transactions than the other altcoins in the list combined. But as you can see Bitcoin has 100x times the transactions as Litecoin… oh no, wait a second, Bitcoin only has 5.5x as many transactions Litecoin. Interesting, but I guess that Bitcoin must be moving mountains of value compared to LTC to justify being worth 100 times more than Litecoin. Let’s look.
Nope. We can see the average BTC transaction(tx) value is only about 3 times greater than Litecoin. What does that mean?
If we do some math on the number of transactions multiplied to the avg. tx value — here’s what we get:
Bitcoin, with 384,936 tx’s with an avg. value of $105,625 =$40,600,658,865 currently being exchanged.
Litecoin, with 70,853 tx’s with an avg. value of $36,201 = $2,564,949,453.
Only 15.8x the value is being sent over Bitcoin instead of Litecoin. Not 100x the value and not even 50x the value. Just 15.8x as much value.
Now if we alone used actual real world usage and value of exchange to derive the market value of LTC this in itself is enough to bring LTC to .0633BTC. But the price at the time of writing this is .01 so to say it is undervalued would be an understatement. The reality is current investors have literally no idea how to calculate the value. They barely understand what a blockchain even is.
There has been so much new money flooding into the market by investors who don’t understand the language we are using, let alone grasp the idea that they can get a transparent realtime look into how many transactions are going in these networks and what these transactions are worth. They come from a world where they get their reports from budgets on the quarterlies. They are the kind of people who take ‘silver to bitcoins gold’ analogy very literally and think that if LTC goes from .01 to .012 (to fulfil the prophecy of current silver to gold oz prices) they will have had a great investment. Like I’ve shown above however, the math is different in crypto and besides:
Realise that Litecoin has only just begun to get mainstream exposure comparatively to Bitcoin. 2017 was the year that Litecoin and legendary founder Charlie Lee started becoming the goto guy for grounded, down to earth insights to the crypto landscape and LTC got penetration into everything from Forbes to CNBC to your girls secret fantasies.
Now today, 1 BTC is anywhere between $14k – $16k depending on the minute you look at the chart. It’s almost that volatile, and for many speculators, they feel the price is already at such a high that they are out of reach. Many newcomers are not even aware that they can buy fractions of a Bitcoin. Even if they are aware — since it’s not like decimals are an entirely new concept — buyers prefer the psychological aspect of owning a whole unit of something, like a nice bar of silver instead of a few grains of gold.
Speculation has been a strong force driving the price upward for cryptocurrencies. But 2018 will mark the year where utility takes the helm. We expect to see a parabolic growth of online stores accepting crypto currencies with Litecoin being the primary coin of choice. Merchants will choose Litecoin because they want a track record. This is where LTC is so appealing since it’s the oldest altcoin and just continues to grow and show time and time again its anti-fragility in maintaining fiat prices. Perfect for merchants who are concerned about making a sale and having it lose % value by the time they exchange.
It will be the year we see salaries and rent paid in LTC, coffee, clothes and cars bought with LTC. By the end of 2018, we expect to see it start to making headlines for outperforming whole economies just like BTC has.
Let’s get behind Litecoin. Because little brother that helped big brother become the beast it is today. Because co-operating with and not working against. Because loyalty. Because strongest hodlers in the game. Because it’s the peoples coin. Because undervalued like actually for real undervalued like I proved above. Because year of the chicken. Because it’s time to buy and exchange with one another at light speed. Because Charlie. Because nothing can stop an idea who’s time has come. Because you.