Called "digital silver" by GEMINI, Litecoin is the brainchild of MIT alumni Charlie Lee. Released in October 2011 as a Bitcoin fork, it is always in the shadow of its big brother. However, it is not a competitor. Instead, it is for smaller transactions and faster settlements.
TNW (formerly The Next Web) reports, "the top 10 Bitcoin addresses house 5.2 percent of the total supply, the top 100 14.7 percent, and the top 1000 35.0 percent." Illustrating the original need for Litecoin-a cryptocurrency that is more decentralized.A few critical features of Litecoin are:
These all point to a coin designed to function as currency. A means to buy and sell everyday purchases. In the words of Charlie Lee, "Litecoin and Bitcoin will work together to solve the world's transaction needs in the future."
One thing that seems to escape many traditional investors is the community aspect of cryptocurrency. It is more in line with an open-source project than a stock—a community of contributors and coin owners responsible for its future success.
There is a forum on the Litecoin website where fans, contributors, and owners share their thoughts and enjoyment of the project. People even buy t-shirts to acknowledge their love for the coin. As such, the community directs initiatives.
The latest of these is privacy. Posting on Reddit, "In the coming surveillance era, privacy will be a valuable commodity and ANY technology that can deliver a reliable form of privacy, will win the next decade." Including a reference to the $21 Trillion in offshore private banking.
The promise of crypto as an actual currency is yet to occur. Instead, it functions mainly as a vehicle for speculation. One caveat is that the Atari Token sale uses Litecoin as one of the approved currencies.
Outside of individual ATMs or debit like cards, there are no universal means of paying for items with Litecoin. The problem is that there are multiple coins in the market, and the crypto community has not drawn lines on each coin's purpose. Add to this, central banks muddying the waters with their digital currencies and Litecoin's (or any other crypto) acceptance as a universal currency looks doubtful.
According to Investopedia, "Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type." The term applies to money, commodities, and other investment vehicles.
What it describes is that my oil future contract for RBOB, "Reformulated Gasoline Blendstock for Oxygen Blending," does not state where my gasoline comes is made. It can be from Bob's Gasoline Plant or Tom's Gasoline Refinery as the origin does not matter. One barrel of gas is the same as another barrel of gas.
For the record, Litecoin is fungible, as is Bitcoin. The reason is that my Litecoin can swap out with a Litecoin belonging to another - both equal in value. Like fiat currency, Litecoin can subdivide into smaller units. The smallest subunit of Litecoin is the "litoshi," which is a hundred-millionth of a Litecoin (0.00000001 LTC). So making change is not a problem.
I was introduced to crypto in 2013 while leading the technology side of a hedge fund. There was this idea in the investment community that one coin will rule them all, which is kind of like choosing an IPO. However, crypto is proving to be more like FOREX than equities.
For example, EUR (Euro) may be worth more than USD (US Dollar), but that is not the point in speculation. Instead, investors are looking for price discrepancies. "Can I buy more EUR with USD this hour than last," is the question.
Charlie Lee declared, "I wanted to create something that is kind of silver to Bitcoin's gold." The silver spot price at the time of writing is $15.72 per ounce, where the gold spot at the same time is $1,741.70. As a comparison, Litecoin is trading at $42.19, and Bitcoin is at $8,951.42.
With a value higher than silver and a market cap of 2.8 Billion at the time of writing, Litecoin is proving to have merit. Let us dig a little deeper.
Having graduated from a top-5 business accelerator, I find it my duty to present an analysis of Strengths, Weaknesses, Opportunities, and Threats (SWOT) for Litecoin.
Litecoin experienced a 51% drop on March 7, 2020. Over the past 12-months, it has lost close to $100 per coin. However, this is on par with the asset class as a whole. Overall, the crypto market is volatile.
How volatile? As of this writing, Litecoin has a 2.45% 30-day volatility index. To compare, Bitcoin has 3.99%, gold averages around 1.2%, while most fiat currencies average between 0.5% and 1.0%.
Fund Manager Crispin Odey, told Bloomberg, "Gold is the only escape from global monetizing." Greenlight Capital and Blackrock Inc. both are urging investors to store their wealth in gold. At the same time, Paul Tudor Jones is bullish on Bitcoin.
Similar to Satoshi and Bitcoin, Charlie Lee is monitored closely by the community. He explains to Yahoo finance, "Whenever I tweet about the price of the Litecoin or even just good or bad news, I get accused of doing it for personal benefit." However, since 2017, Lee has very few actual holdings in Litecoin. Something he considers a conflict of interest.
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© 2020 Todd Moses
The strategies discussed are for illustrative and educational purposes and are not a recommendation, offer, or solicitation to buy or sell any currency or to adopt any investment strategy. There is no guarantee that any strategies discussed will be useful. Todd Moses is not a licensed securities dealer, broker, or US investment adviser or investment bank.