Is Litecoin a Better Investment Than Bitcoin?
Litecoin has been on the move.
As Ethereum's and Bitcoin's prices plummeted amid panic surrounding Bitcoin's future, Litecoin surged. It moved from $40 in June to a high of $55.
Considering its quick jump in price, many investors are doing a double take and reexamining Litecoin. Perhaps its core weakness — being too similar to Bitcoin — will help it grow in value. It seems to be acting as a hedge against Bitcoin's rampant volatility.
The Wealth Daily research team put together a detailed report about Litecoin, its founding team, and its unique traits, which investors can read here.
The purpose of this article is to look at the relationship between Bitcoin and Litecoin and analyze ways that relationship could affect Litecoin's future.
The Strange Relationship Between Litecoin and Bitcoin
History has taught us that Bitcoin has the power to influence the rest of the digital currency market.
We observed this lesson again this week when Bitcoin went streaking down after a 28% rally following hopes that the "Bitcoin Civil War" was finally coming to an end. Ethereum's price followed Bitcoin.
But, even as other digital currencies tank into the red, Litecoin seems immune to Bitcoin's siren call.
Looking at the chart below (Litecoin in blue, Bitcoin in red), investors can see that Litecoin's value actually increased when Bitcoin's remained static. It tanked when Bitcoin surged and then continued to rise alongside Bitcoin for the remainder of the month:
The chart indicates that some investors are unwilling to bet on Bitcoin. After a month of turbulence, much of which was generated by the Bitcoin community, investors seem to be putting stock in alternative coins that serve the same purpose.
Is Litecoin a Better Investment Than Bitcoin?
This is a great question. But it requires investors to pit the heavyweight of the digital currency world against a much smaller contender.
If we look at the two currencies from a technology standpoint, Litecoin trumps Bitcoin for two reasons: transaction speed and mining ease.
Litecoin can produce blocks for its blockchain much faster than Bitcoin. In fact, it only takes Litecoin 2.5 minutes to complete one block (or transaction). It takes Bitcoin 10 minutes. This is worth noting because Litecoin's ability to complete transactions four times faster than Bitcoin gives it a leg up when investors focus on utility alone.
Litecoin also has a far simpler algorithm. It doesn't take as much energy or time to mine Litecoin. Of course, this may change with time. But for now, that quality holds more appeal for miners who are frustrated with Bitcoin's scaling issues.
And that brings us to another big point for Litecoin: its cohesive community. Bitcoin's community can hardly agree on anything, a fact that we've been keenly observing with the chaos surrounding the upcoming "fork." Where Bitcoin's community can't find common ground, Litecoin's community was able to come to consensus.
And this appeals to investors who want stability. Many people speculate that Bitcoin will be torn apart by its own community.
All these things are advantages that Litecoin has over Bitcoin.
But if investors decide Litecoin's worth based on these things alone, they are missing one key point: Bitcoin still has the first-mover advantage.
Next year, Bitcoin is going to celebrate its 10th birthday. The digital currency has had a lot of time to woo investors and win over the market — time that Litecoin hasn't had since it only launched in 2011.
Overcoming Bitcoin's massive market hold is a huge challenge for Litecoin. And it's one that it may never overcome. Winning the support of hardcore Bitcoin fans is nearly impossible, especially for a currency with similar utility as Bitcoin.
Playing It Smart Means Knowing the Players
Any smart investor knows that a healthy investing portfolio is a balanced portfolio.
Following that logic, it makes sense to invest in more than one digital currency. Some investors refuse to do this, simply because they believe only one digital currency will triumph.
But this possibility is becoming more remote.
With more and more digital currencies rushing the market — and many of them offering groundbreaking utilities — it seems unlikely that just one digital currency will exist in our future.
Some economists still consider Bitcoin an economic singularity. But the bulk of technology analysts thinks that we'll see a world where a handful of digital currencies operate in our global economy. Just yesterday, Fortune published an article with expectations from experts about what we can expect from the digital currency market.
Along with assertions that certain digital currencies (specifically Bitcoin and Ethereum) are here to stay, experts pointed out that:
"No one can say how many tokens and coins and blockchain protocols will eventually win out, but the experts seem to think there’s room for a multitude."
So when investors are evaluating Litecoin, they need to think about the traits that set it up to succeed in our global economy. More importantly, they need to think about whether these traits will allow it to survive it's rival Bitcoin. Litecoin doesn't need to beat Bitcoin to be profitable - many investors have already turned a profit - but it does need to have a spark, something that will allow it to remain relevant in Bitcoin's world.
Here are some takeaways:
- Litecoin's community isn't constantly at war. I thought this was an interesting point, considering the way that Bitcoin's community (and its inability to agree on most things) has had an impact on Bitcoin's price. In fact, when the Litecoin community had to agree on whether to hard fork, there was almost no disagreement.
- Litecoin has a faster transaction speed and this may help it keep up with the demands of a global economy.
- Litecoin's faster mining speed is appealing to miners.
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