Litecoin (LTC) Bulls: Factors that Could Change Bitcoin Dominance
Litecoin (LTC)–Litecoin has had a fairly good week despite the nearly 100 billion USD dip that took place in the cryptomarkets over the weekend. LTC has managed to climb 23% in value to 170 USD, as of writing, after reaching a new relative low of 138 USD Sunday evening. Some have even pointed to the possibility of a Litecoin bullish breakout forming, with indicators that LTC is weathering the bear market of cryptocurrency ahead of most other coins. Part of the increase in Litecoin valuation has been the steady climb of BTC. For reasons known to most of the market, Litecoin tracks closely to BTC pricing and the investor-confidence inspired by a climbing Bitcoin valuation is good for the entire market. However, as Bitcoin fails to climb above its 200 day moving average, in addition to showing a “death cross” forming in technical analysis, it’s possible that the market has yet to make a bullish return to BTC.
Here are a few factors that could lead to a shifting away from Bitcoin dominance in favor of Litecoin:
Renewed Frustration Over Bitcoin Usability
We have argued before that the cryptomarket is tied closely to the success and failure of Bitcoin. Despite improvements in technology and partnerships announcement, no currency has been able to break free of the bear market and return to valuations pre-January 2018–in part because of flagging investor confidence in Bitcoin which echoes through the rest of the industry. At present, Bitcoin fees are averaging around 5 USD, with confirmation times lingering in the 10 minute range (a sharp drop from January 2018, but still prohibitive to in-store purchasing). Lightning Network is beginning to look more of a reality, which is heartening news for Bitcoin usability and ongoing adoption. Given the massive market capitalization and brand recognition for BTC, it’s almost certain that Bitcoin will be able to solve the scalability issue and bring the 7 transactions per second to a more reasonable level for widespread use. However, it’s also becoming a race against time in order for Bitcoin to retain its skewed 35%+ market dominance. If lightning network fails to offer a solution to the high fees/slow transaction speeds, the growing consumer desire for usable currencies in transactions could cause the market to begin shifting away from the traditional focus on Bitcoin. This opens the door for a currency like Litecoin–with strong ties to both Bitcoin and the industry of cryptocurrency, in addition to having a long history on the market–to become the obvious choice for market transaction adoption. There are features to other currencies, particularly the class of DAG cryptos (Nano, Iota, etc) which offer instant and free transactions, that could become more appealing to the market in the event of BTC dominance erosion. However, at present those currencies are still relatively niche and may find it more difficult in gaining general public trust and media interest over a more established coin like Litecoin.
Litecoin has been a testing ground of sorts for eventual Bitcoin implementation. While some have taken the view that this makes LTC a subordinate and throwaway currency compared to BTC, it also creates the culture and conditions for greater innovation. Litecoin had segwit implementation months ahead of BTC, keeping fees low and transactions fast despite the huge growth in network traffic over 2017. Litecoin is also a contender to implement lightning network or some other derivative ahead of BTC, and could be the first currency to offer ubiquitous cross-chain transactions through atomic swap. Litecoin’s history as a tinkering lab for Bitcoin and other cryptocurrencies has created a culture committed to innovation and improvement, which is beneficial to growth and overcoming the hard wall of scale that impacts nearly all cryptos.
Market Search for Novelty
Cryptocurrencies are niche enough in general that the market has yet to grow tired of them in the same way they do nearly all other products and technology. While Facebook has managed a hold over the social media scene for more than a decade, we all remember the steady transition from Friendster to Myspace to Facebook. People crave novelty, particularly in relation to technology. BTC could suffer from a similar fate. Just as the average person upgrades their iPhone or car every few years, investors could be looking for novelty in the crypto-space the precludes Bitcoin. Litecoin is not a radical shift from Bitcoin, and represents a hard fork from the original currency in October 2011. However, Litecoin could use its familiarity to its advantage while still differentiating itself from Bitcoin. If enough industry figures, media outlets and headline-grabbing investors begin espousing the benefits of Litecoin, it could signal a bullish rush towards LTC–thereby eating into the dominance of Bitcoin. This scenario seems even more likely if Bitcoin fails to achieve the point listed above of solving scalability issues. Increased investor frustration is going to vent in one of two directions: either complete withdrawal of capital from the crypt-space, thereby prolonging the current bear market, or shifting investments to a currency that offers higher returns on appreciation with greater usability. Despite having only a coin supply four times that of Bitcoin, Litecoin’s market capitalization is 6% of what BTC commands. If investors are putting money into Bitcoin for the purpose of usability and real world adoption, Litecoin provides a better alternative in terms of utility while also having massive room for price growth through appreciative gains.
Strong Presence from Charlie Lee
Bitcoin has received a fair amount of good press and public interest over the mystery surrounding BTC founder Satoshi Nakamoto. However, Litecoin also benefits from the realized presence of founder Charlie Lee, who has been an enthusiast and developer in the crypto space since nearly the beginning. Lee last made international headlines by selling off his entire holding of LTC during December’s all time high of 380 USD– a move that infuriated Litecoin investors, but also signaled the transition of LTC into a market of mature partnerships. Investors feel confident in founders with a financial stake in their product, as it opens the door to behavior and manipulations that are in the best interest of short-term price movements. However, for long-term growth and better media presence, a founder devoid of any financial ties is a preferable situation. Consider the shit storm stirring around Mark Zuckerberg and the recent Facebook allegations. Zuckerberg is not only the figurehead for the 500 billion USD company, but also the most apparent punching bag when things go wrong. The general public feels doubly betrayed in instances of shady dealings, because they deliver profit to shareholders at the expense of user experience. Cryptocurrency is no more immune to public backlash than traditional stocks. Lee may not have the same Batman-like mystique as Satoshi Nakamoto, but he is a charismatic and intelligent figure that has guided Litecoin to a top five position in the market, and managed to do so without creating distrust around his currency.