Litecoin News Update
If you have recently been watching Litecoin descend the ladder of valuation, I can understand your frustration. But, my friend, if you fear that Litecoin is somehow losing to younger crypto-coins, you’re wrong.
If we go by the book, Litecoin is now the eighth-most-valuable cryptocurrency in the world, down from its long-held fifth spot. Litecoin has been pushed out of the way by three largely unheard-of crypto-coins. “Market capitalization” is the lousy measure that has been altering these ranks.
But here’s the catch.
Possibly none of these younger coins have the potential to stay up there for too long. How can I say this with conviction?
Because market cap is a misleading number. While I agree that we cite it in our analyses, it is not a decider of a coin’s ultimate fate. There are far more concrete measures of potential success, one such being volume.
Take the example of Cardano (ADA), a cryptocurrency that made it to the top five this week.
With a market cap of $32.0 billion, it is now vying for the fourth spot, where Bitcoin Cash (BCH) is sitting with a $40.0-billion valuation.
It may seem like the next big thing, until you look at its average volumes.
Cardano’s average trading volume in the past 24 hours was just under $700.0 million. It is nowhere close to Litecoin’s average of $4.0 billion or that of the top four cryptocurrencies.
If you look at Cardano’s history, volumes have averaged around $100.0 million to $200.0 million in the past month, ever since the rally in altcoins kicked off.
The same is true for NEM (XEM) and Stellar Lumens (XLM), both of which have paltry average volumes compared to Litecoin’s.
Why does it matter, you ask?
Simply because there’s a huge risk that one large whale may enter this pond and gobble up all the small fish.
What I mean is that, because liquidity is so thin in these coins, a major buyer can easily manipulate their prices and actually cause a crash if he/she begins to sell.
This is why, as fast as they have risen to the top ranks, they can drop from there with the same speed.
Just take a look at IOTA (MIOTA) for a good example (another cryptocurrency that beat Litecoin to the fifth spot earlier in December). With a $10.0-billion market cap, it is now sitting in 10th place.
With Litecoin, at least, investors may not have that concern.
The reality is that far too many cryptocurrency investors are looking to make a quick buck. They are not in it for the long haul. So, every time a new coin begins to trend in the media, the investor herd moves in to buy it. As soon as the coin begins to lose relevancy, the herd sells it.
Market cap without volume is a meaningless metric for cryptocurrencies. Forget these trivial measures and focus on the big picture. Look for a fundamental reason to invest in a cryptocurrency. I like to begin with utility. Ask yourself: “What is it that sets the coin apart from the 1,300 other altcoins? Will it be around five to 10 years down the road?”
With Litecoin, you are investing in “digital silver” touted to become a decentralized mode of digital payments, replacing the slower and more expensive Bitcoin. And, since it is more transparent, there’s an additional reason for people to adopt it.
We believe in the power of “hold on for dear life” (HODL), as we maintain our bullish Litecoin price prediction for 2018 with an LTC price target of $400.00.