The price of Litecoin was looking good, and it hit a month-long high just days ago: but like most of the crypto market it fell off a cliff in the past 48 hours. Although at the time of writing it has recovered to $55.67 and a market cap of $3.24 billion, it’s still some way off its recent $70 peak.
So, what went wrong?
The straightforward answer is: nothing. The surprise is that Litecoin rose to those heady heights, but the correction is in perfect harmony with the remainder of the market. For better of for worse, Litecoin’s performance is both a victim of Bitcoin’s slips, and the beneficiary of its ascendancy.
Diversification, as we’ve highlighted before, is still a myth in the world of cryptocurrency, and the Litecoin price seems inexorably tied to Bitcoin’s value.
Lemmings Rushed To The Cliff
When it slipped beneath $68, the cryptocurrency lemmings hurled themselves into the abyss together and rushed to sell. The Momentum effect works both ways, but Bitcoin’s drop might have put it in trouble in the first place.
The market dipped by a double-digit percentage and Litecoin (LTC) dropped 11% in its Market Cap. Part of that was investors ditching out of riskier investments and heading for the relatively safe shores of Bitcoin, whose market dominance grew during this 48-hour dip. From a low of 52.85%, Bitcoin dominance hit a high of 55.14%.
But it may have been Bitcoin’s unstable rise that caused the dip in Litecoin in the first place, as much of the market is tied to the headline Bitcoin prices. When Bitcoin hit a resistance point at $7,400 and headed South hard, the whole market took a downturn.
Litecoin wasn’t alone as Bitcoin bounced back and forth from just under the $6,500 resistance point. If Bitcoin bursts through $6,500, then the graphs suggest that Litecoin could follow suit and attack its own, much smaller, $60 resistant point.
Litecoin’s Long Term Potential?
Although commonly overshadowed by Big Brother Bitcoin, there’s no reason to believe Litecoin is going to become irrelevant anytime soon. Litecoin has been around since 2011, and reached a $1 billion market cap in 2013.
Many experts have backed Litecoin in recent months and it has one of the biggest profiles in the altcoin space. After a recent rebrand, and good publicity in advance of the upcoming Litecoin Summit in San Francisco, there’s no reason to believe this crypto is going extinct anytime soon.
Last year it became the first big cryptocurrency to adopt the SegWit system and it has also adopted the Lightning Network, which performed a sub-1 second transfer of Litecoin LTC from Zurich to San Francisco.
Is Litecoin Blockchain Better Than Bitcoin?
The Litecoin blockchain offers faster transactions than Bitcoin, taking with 2.5 minute blocks and negligible transaction fees. That (plus a surprising downturn in Monero, after its privacy was questioned) made it a favorite on the Dark Web.
That was a blessing and a curse, as the Dark Web comes with negative connotations. However, it did provide a proof-of-concept and showed that Litecoin is a viable option for payments systems.
But in the short-term, its fortunes seem tied to the Bitcoin protocol it was forked from.
Although objectively faster than Bitcoin, it remains to be seen if Litecoin is fast enough to keep up.
The author is not currently invested in any digital currency.