Another day, another 20% rise in Bitcoin Cash. Is this good Litecoin news? Should investors get excited about the fact that Litecoin is in the mix of Bitcoin’s civil war, or should they run for the hills? Let’s take a closer look…
First off, the effect on LTC prices appears negligible.
I mean, yes, the Litecoin to USD exchange rate dropped 0.5% to $61.33. But Litecoin is still positive for the week. The same goes for the Litecoin to Bitcoin rate, which is down 0.55% to 0.00944739 BTC.
But let’s backtrack for a moment…
What exactly is happening with Bitcoin (BTC)? We know that investors are rotating massive amounts of market cap to Bitcoin Cash (BCH), but why are they doing that?
It all begins with Bitcoin—the original Bitcoin—having trouble servicing high demand volumes.
Developers came up with all sorts of ways to unclog the blockchain and all of them involved upgrading Bitcoin’s core protocol. Here’s the catch: You can only perform an upgrade by getting a majority vote of support within the Bitcoin community.
Fail to secure a majority and you’re left with two options: 1) Shut up and sit down, or 2) Split the blockchain, thus forming your very own spin-off currency.
The latter is how Bitcoin Cash came into existence. It was the result of a Bitcoin fork in August…
Fast-forward to November.
Bitcoin just survived a second fork and nearly dodged a third. It is vulnerable. And this makes it the perfect time for Bitcoin Cash to pounce. No surprise, then, that a statement starts making its way through media circles claiming that Bitcoin Cash will replace the original Bitcoin.
It was drafted by Tom Zander, the founder of Bitcoin Classic and a long-time nemesis of the original Bitcoin. He wrote: “It is now up to the next billion people to start to use Bitcoin Cash. In at most 6 months I’m sure we’ll just drop the ‘Cash’ and call it ‘Bitcoin’.” (Source: “Bitcoin Classic Shuts Down As Staff Claim Bitcoin Cash Will Rule ‘In 6 Months’,” The CoinTelegraph, November 10, 2017.)
This quote explains why BCH is surging! There is no mysterious reason. No technological breakthrough in Bitcoin Cash. It is simply random speculation that BCH will replace BTC.
As such, we’re more than likely to see a rotation back towards Bitcoin. Investors tired of the constant civil war might, however, seek their fortunes in altcoins like LTC instead. We’re starting to see higher trading volumes on LTC, so that trend might already be in effect.
Daily Litecoin Chart
Do you want to know why I’m skeptical of BCH replacing BTC? Because CME Group Inc (NASDAQ:CME) might start trading its Bitcoin Futures contract as early as mid-December. And it is using BTC, not BCH. So when big Wall Street bets come swinging in, raising trading volumes and Bitcoin prices, what chance does BCH really stand?
Considering that we do not recommend shorting cryptocurrencies (how would you cover the trade?), it seems best to wait out the civil war in Bitcoin-adjacent altcoins like LTC. They are likely to catch a contact-high from a bullish rotation.
As such, we maintain our $200.00 Litecoin price forecast for 2018.