In the middle of 2018 the Litecoin price sits at around 75USD which is approximately 0.01 Bitcoin (BTC). The alltime high of Litecoin was around 350USD ( or 0.046 BTC) and was set in Dec 2017. Just one year before this, the Litecoin price in Dec 2016 was priced at around 3.5USD. This just illustrates that the price has risen significantly in value despite having achieved very little real world adoption.
According to the Litecoin Foundation there are just over 200 merchants listed who accept Litecoin. Although this is an ok number it hardly justifies a thriving currency ecosystem worth around 4 billion USD. To keep this Litecoin valuation into perspective this is similar to that of the total worth of the Uruguayan Peso currency used by several millions of people every day in Uruguay.
This merchant adoption is indeed less than some other Crypto Currency coins such as DASH who have a much smaller market cap. DASH reportedly has well over 1000 merchants accepting DASH and is seemingly fast approaching 2000 with its recent efforts in South America, especially Venezuela. This shows that despite the hype, Litecoin is not actually that widely used for its primary purpose as a currency. Even more concerning is that the merchant adoption rates of Litecoin seem to be de-accelerating.
A key factor in the increase of value for any new technology is not just the size of the network. It is also the continued ongoing development of the technology. This development helps keep competitors at bay. This is concept is nicely reinforced by the well known phrase of ‘Innovate or Die‘. Despite Litecoin having been the first major crypto coin to adopt ‘Seg Wit’, it is the last and only major development in Litecoin since its inception. Seg Wit has been arguably a success for Bitcoin ( for which it was actually developed) but time will tell if this ‘upgrade’ actually only confused the overeall supply of coins ‘available’ on the Seg Wit enabled protocols. This because lightning coins are arguably Alt Coins and then ‘Atomic Swaps’ in essence actually merge protocols and their fixed supply coins together.
The frequency and significance of Litecoin Commits on Github seems to show a lack of ongoing unique development ideas that could revolutionise the crypto space. This is unlike many other active and highly valued projects which appear to be driving innovation in computer science and cryptography.
This has lead many to label litecoin as a Bitcoin testnet that will blindly adopt the next experiment proposed by Blockstream.
If litecoin’s use case is as a testnet for Bitcoin then there are significant powerful interests in keeping the coins value relatively high, otherwise it could no longer be reliably used as a ‘testnet’. These powerful interests could be a positive driver of price and help keep the fanboy’s hopes alive.
The thousands who bought Litecoin at the tail end of 2017 ( mostly as the price ‘looked’ cheaper than bitcoin) have created a fan base of followers who will defend Litecoin at any price. Added to this you have crypto influencers such as Cliff High who continue to make positive remarks on future price despite little justification. This said, the crypto markets have witnessed many times the phenomenon of fanboys keeping prices significantly inflated. However as more ‘Smart Money’ enters crypto and uses tried and tested techniques that includes quantitive analysis on actual adoption etc then it could be argued that Litecoin gets ignored by this more well informed capital.
Clearly one big reason for Litecoin’s continued dominance in the market cap rankings is its listing on the world’s most popular Fiat to crypto exchange, CoinBase. For obvious reasons it is widely speculated that the only reason coinbase listed Litecoin was because of founder Charlie Lee having been an employee of Coinbase until mid 2017.
Charlie Lee, the founder of Litecoin, stated he would focus full time on Litecoin development after his departure from Coinbase. However he publicly stated in early 2018, at around the time of Litecoin’s all time high in price, that he sold and donated all of his Litecoin. Although he wasn’t the only early crypto adopter to cash in some profits during this time, the justification for declaring his sale was questionable. He said it was to avoid any conflict of interest in his influence over LItecoin, but this doesn’t make complete sense. Crypto has proven to a great extent the power of economic incentivisation as this one of the key components in keeping most crypto coins secure. So now the lead developer and figure head of Litecoin has no economic motivation to provide value to the Litecoin network.
Added to this Charlie Lee is now advisor to HTC for their new blockchain phone so he is even more distrcted from actually innovating or making any unique improvments to the Litecoin Blockchain. HTC claim they will add litecoin to the native wallet on the phone but we have to asume that many other coins will also be added.
There was some recent news that Litecoin had teamed up with TokenPay ( who recently conducted an ICO of questionable value) to acquire a combined interest of almost 20% in a small regional German bank. The Litecoin foundation and TokenPay bought 9.9% of the equity in WEG bank to avoid additional regulatory scrutiny of acquiring over 10% in a regulated financial institution in Germany. I can only imagine what these German regulators are focusing on right now. Any bank, and especially smaller regional banks will have may KYC/AML issues to contend with and any regulator will find it very easy to find issues if they really wanted to. This only proven by the sheer size of the AML related fines that all banks have received despite spending millions on trying to mitigate these issues. The only reason to buy such a positon in a retail bank could have been driven by the difficulty to find good banking relationships. It is hard to see how this will end well and or how it will specifically drive Litecoin adoption? Certainly the Litecoin Foundation funds used in this acquisition will depreciate the value of available funds for any further development.
As is said in investing, assets will eventually meet their true value. If Litecoin wants to keep up with other more innovative coins in the space it will need to start gaining some considerable adoption to justify its continued high price. Otherwise it will find itself a relic of a previous crypto age and one of the biggest bull traps in the most recent bubble.
Will this coin make Lite work of development and adoption? Or will it make a lot of heavy bag holders carrying lite bags in the future ? Let us know….