Top cryptocurrencies have been tearing it up in the past year, and Litecoin (CCC:LTC-USD) is no exception. The price of Litecoin has nearly tripled in the past 12 months. However, with so many cryptos to choose from, it can be difficult for investors to know where to start.
Liquidity: With a market cap of $11.6 billion, Litecoin is currently one of the 10 most valuable cryptos. That size means Litecoin has relatively high visibility and high liquidity. Its average daily trading volume is over 2 million coins.
Liquidity is extremely important in the crypto market given the extreme volatility in the space. Without enough liquidity, a single seller could potentially crash the price of a cryptocurrency. Fortunately, LTC investors will never have to worry about getting out of their positions.
Reliability: When it comes to the reliability of the underlying software, Litecoin investors can rest easy knowing Litecoin is one of the oldest cryptos and was essentially created as a fork in the Bitcoin (CCC:BTC-USD) blockchain. Like Bitcoin, LTC is open-sourced and decentralized.
Its developer was computer scientist named Charlie Lee. Lee previously worked for Alphabet’s Google (NASDAQ:GOOG, NASDAQ:GOOGL) and now works for Coinbase (NASDAQ:COIN). He’s certainly no slouch. Lee’s initial goal was to make Litecoin be to Bitcoin what silver is to gold.
Performance: Lee wanted to improve upon Bitcoin, so Litecoin has several superior features. Bitcoin transactions take, on average, just under nine minutes to verify. LTC transactions take only about 2.5 minutes to verify. That superior speed suggests Litecoin may prove easier to scale over time.
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In addition, Litecoin transactions are cheaper than Bitcoin transactions. The average Bitcoin transaction costs about $4.38. The average LTC transaction fee is only 2.6 cents.
Uphill brand battle: In the world of crypto, Bitcoin is boss. While Litecoin may have been built to be an alternative to Bitcoin, most investors see Ethereum (CCC:BTC-USD) as the primary alternative to Bitcoin. Whether or not it’s fair, the fact that Litecoin was a fork of Bitcoin hurts its reputation as a true alternative. As of now, many investors lump Litecoin in with the other eight cryptos that are among the top 10 in value other than Bitcoin or Ethereum.
Losing market share: Another discouraging factor for Litecoin investors is that the crypto has been losing market share, not gaining it. During the last huge cryptocurrency run back in 2017, Litecoin ended the year as the fifth largest crypto by market cap. Today, it is No. 10.
In the past three years, the price of Litecoin is up 44.9%. In that same time, the price of Bitcoin is up 365.4%. Ethereum is up 348.6%.
Litecoin’s creator dumped his coins: One of the most devastating headlines for Litecoin investors in recent years came in 2017 when Lee announced he had sold all of his Litecoin. Lee timed the sale nearly perfectly, announcing it in December 2017 within weeks of the market top.
Lee said he sold his stake so he could not be accused of manipulating the Litecoin market. He said it was a conflict of interest for him to tweet about Litecoin when he owned such a large stake in it and was such an influential voice. Even if his reasons for selling were admirable, it doesn’t instill confidence in the crypto when the founder dumps all of his holdings.
How To Play It
I’m generally not bullish on cryptocurrencies as a group. I think all cryptocurrencies will face pressures from global regulators in years ahead. They are still relatively difficult to use to make everyday purchases. And they are way, way too volatile for anyone to use as a reasonable store of value.
That being said, I’m particularly bearish on cryptos other than Bitcoin and Ethereum. Bitcoin has the true first-mover advantage and brand value. Ethereum has far superior technology and is the most popular alternative to Bitcoin.
It’s going to be difficult enough for Bitcoin and Ethereum to gain mainstream traction in years ahead. I don’t know if cryptocurrencies are the future of currency or simply the latest Wall Street fad. Either way, I have a hard time seeing a reason for Litecoin to outperform Bitcoin or Ethereum in the long-term.
On the date of publication, Wayne Duggan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Wayne Duggan has been a U.S. News & World Report Investing contributor since 2016 and is a staff writer at Benzinga, where he has written more than 7,000 articles. Mr. Duggan is the author of the book “Beating Wall Street With Common Sense,” which focuses on investing psychology and practical strategies to outperform the stock market.