Will Litecoin Outperform Bitcoin This Cycle?

My arguments for and against this idea.

 
This made me think of another comparison: Bitcoin (BTC) vs. Litecoin (LTC) — the old guard.
 
Despite its mediocre performance so far this year, there’s a chance that LTC could outperform its more prominent counterpart. 
 
Today, we’ll examine reasons for and against this. 

Reasons in favour of LTC doing better than BTC 

1) Crypto vanity 

No, this doesn’t involve flexing to people on social media by showing the world your wallet balance in USD. 
 
It’s far less impressive and even more cringeworthy than that. 
 
Suppose you put $1000 into this space. You can put it into BTC or ETH and get a fraction of each (0.1 BTC and 0.25 ETH at current prices, give or take). 
 
But these people aren’t satisfied until they get several units of their favourite crypto. 
 
This is a major reason people keep a close eye on cryptos valued less than a dollar; there’s even more enthusiasm if the same asset is a small-to-mid cap. 
 
Tying it back into LTC, that $1000 can buy you not 1,2,3…but 8.1 LTC.
 
I’ve previously described this phenomenon without knowing its name. Thank you to The Modern Investor on YouTube for reminding me of this.
 
You can see a newbie from a mile away when they adopt this tactic.
 
ith an 11x increase in the number of liquid meme coins, i.e., those with a trading volume above $0, compared to 2021 (1,091 meme coins vs 92 three years ago), crypto vanity is alive and well amongst the lowest common denominator who focus on s&$t projects.

Why have 8 LTC when you have billions of tokens for some random meme coin? I digress. 

2) Hype surrounding a potential spot Litecoin ETF

With an incoming crypto-friendly administration and the strong possibility of XRP joining Bitcoin and Ethereum to get spot ETFs, I wouldn’t be surprised if we get approvals for multiple publicly traded funds in the US next year. 
 
Litecoin is more likely to get the all-clear from the US SEC than other crypto assets because it is a hard fork of Bitcoin and shares many similarities, some of which I alluded to in point 3. 
 
While Bitcoin has already benefited from the spot ETF narrative throughout 2023 — leading to its eventual approval in January — any hype about potential spot Litecoin ETF submissions by existing providers (BlackRock, VanEck, 21 Shares, WisdomTree, etc.) could boost LTC’s price. 
 
It is difficult to tell how much this element will benefit LTC’s price, assuming spot ETFs get the all-clear. Amid a bull run, I’d say most of the price appreciation for altcoins (notably those outside the top 20, such as LTC) comes down to market-wide euphoria. 

3) Fundamentals

Both Bitcoin and Litecoin remain robust networks.
 
Like Bitcoin, Litecoin has a similar halving event, which occurs roughly every four years (or 840,000 LTC blocks, to be exact). 
 
Its latest reward halving — the third one to date — took place on August 2, 2023. Based on the approximate block production time of 2.5 minutes (four times faster than Bitcoin), the next event is scheduled for July 29, 2027.
 
Moreover, it is decentralised, uses proof-of-work (PoW), has had 100% uptime since debuting in 2011, and has historically been considered a testnet for Bitcoin. 
 
While it has an issue with a lack of miner pool distribution — that is, three LTC mining pools (F2Pool, AntPool and ViaBTC) account for 73% of total miner operations, Bitcoin also has this issue. 
 
Regarding network decentralisation, Litecoin has over 1,160 discovered nodes worldwide versus more than 8,000 for Bitcoin. 

4) Respective distances from all-time highs (ATHs)

While BTC holders are celebrating the pioneering crypto hitting its ATH and continuing its price discovery, LTC is far from its 2021 peak, let alone its 2017 top. 
 
Many will also see this as an opportunity, especially for the remainder of this bull cycle, by assuming it’s more plausible for LTC to 3 or 4x its current price, around $120. 
 
As a reminder, past performance doesn’t guarantee future returns. Just because LTC managed to set a new ATH of ~$413 in May 2021, it doesn’t mean it’ll reach that again (in this cycle), even when factoring in inflation. 
 
Moreover, even though its circulating market cap is a fraction of Bitcoin’s — $8 billion vs ~$2 trillion — it outpacing BTC from this point onwards in % terms isn’t guaranteed.

Arguments against LTC outpacing BTC

A different cohort of investors versus 2017

Crypto was still a niche idea until 2017, with retail investors having much more influence than they do today. 
 
Institutional investors existed then — albeit secretly — but weren’t as dominant in this asset class. 
 
The big end has emerged as the “smart money” in the space, in part due to a plethora of resources at their disposal to get a massive edge over the small fry (i.e., us plebs), particularly when it comes to trading tools and accessing important key info before we do. 

In addition to retail investors being more likely to panic sell, this allows the big end of town to boost its bags.
 
Bitcoin, Ethereum, and, to a lesser extent, XRP remain the talk of the town. 
 
Don’t just take my word for it. Let’s look at Google Trends search data, which speaks volumes.

You might need to log10 the Y-axis of this chart to make it less embarrassing (at first glance) for Litecoin.
 
The TL;DR is that almost no one gives a flying F$&k about Litecoin anymore. 

To compare it to Bitcoin or Ethereum in December 2024 is to bring knives to a gun (dare I say, bazooka) fight. 
 
Yes, Grayscale, a renowned digital asset manager, still manages $220 million of LTC, but this pales in comparison to its Bitcoin Trust ETF (GBTC), whereby it controls $20 billion on behalf of its clients.
 
The company also has its Digital Large-Cap Fund (GDLCF), which no longer features Litecoin. On the other hand, Bitcoin accounts for nearly 73% of this fund, valued at $783.29 million as of September 12. 
 
Anyhow, I think the project is coming to this realisation. It (temporarily) pumped following this tweet. 

Even though this tweet is a healthy dose of self-deprecation, part of me believes there’s an element of truth to it, especially with the lack of meaningful (i.e., large) partnerships and a fraction of the interest it received in 2017. 
 
Will it survive as a legacy coin? Possibly for a few more years, but other projects with solid use cases are rising: Render, Pendle, Ethena, ASI Alliance, Aave, Stacks, The Graph, VeChain, etc. 
 
Although these promising protocols have a lower market cap than Litecoin, they’re all worthy of overtaking it sooner rather than later. 

Far less adoption of LTC

 
Even though LTC is a bargain, both relative (distance from its ATH) and in absolute terms (price vs. BTC), I don’t see it as a better alternative to the flagship crypto unless we witness a major spike in significant partnerships and adoption in the coming months. 
 
Considering that BTC will also pick up in interest and continue its price discovery on route towards a $2.5 trillion market cap, it will be a steep climb for LTC fans. 
 
In its defence, Litecoin remains faster and cheaper than Bitcoin. As a network, it would be best suited to handle many small transactions that would have otherwise been conducted on Bitcoin. 
 
This would neatly tie into the historical narrative of gold being used as a store of value and for larger transactions. In contrast, silver was more popular as a medium of exchange among the regular folk. 

However, I feel that Litecoin’s window of opportunity to stand out as a payment method is beginning to close, or at least become restricted, mostly due to rising competition in the space since 2017, notably XRP and Cardano (ADA). Why?
 
— XRP has emerged stronger after being dragged through the mud by the US SEC. It continues to build partnerships with dozens of fintech and TradFi institutions, not to mention providing ultra-cheap and rapid remittances on its ledger.
 
— Cardano (ADA) has made massive strides, particularly since it implemented staking (the Shelley) smart contracts in 2021 (Goguen) and scalability improvements (Basho) via Hydra Heads. Check out its roadmap for more details. 

Moreover, Emurgo — one of the three major entities beyond Cardano, helping boost Web3 adoption for this blockchain — is working with BitcoinOS to bridge smart contracts on Bitcoin with Cardano’s blockchain.
 
This means that users can sign Bitcoin transactions using ADA as gas. 
 
— Avalanche (AVAX), which features in the GLDCF. 
 
— Solana (SOL), Ethereum (ETH) and others. Mind you, these are best suited as smart contracts platforms rather than stores of the value of payment methods, especially not ETH in its current form. 
 
The more Litecoin rests on its laurels, the more likely others will come along to take even more market share. 

Additional thoughts

If I’m also presenting a bearish argument for LTC vs BTC, why am I still running with the plausible case that LTC could generate a higher ROI for the rest of this cycle? 
 
Because during the bull runs, we see sensible and irrational gains across the market. 
 
What do I mean? Cryptos with strong use cases, major partnerships, retail and institutional interest and those with staying power (the blue chips) generally get the gains they deserve. 
 
I.e., price increases for these projects are generally justified. 
 
Then there’s the other category of irrational, nonsensical gains.
 
Think meme coins, rug pulls, copycats, etc. 
 
Cases in point are Dogecoin (DOGE), which reached a $75 billion market cap, and Shiba Inu (SHIB), which peaked at roughly $63 billion in November 2021. 
 
For context, according to stats from Companies Market Cap, this is on par with the current market caps of Santander, Nintendo, and the energy multinational BP and larger than General Motors (some of the 300 largest businesses worldwide). 
 
For those who held these meme coins, I sincerely hope you cashed out a portion of the profits and converted the rest to BTC, ETH, ADA, XRP and other blue chips. 
 
Per Litecoin, I think it falls somewhere between these two (if you were to put altcoins on such a spectrum), but tending towards a more serious project.
 
Amid the most euphoric part of this bull run, crypto vanity will boost cryptos with lower unit prices, including Litecoin. 
 
However, times have changed since 2017, and there’s more awareness about the significance of holding as little as one million satoshis (0.01 BTC) or 0.25 ETH than owing larger amounts of a lesser-known digital asset. 

In 2017, Litecoin’s founder, former Google employee Charlie Lee, stirred up controversy by opting to sell almost all LTC holdings at the (2017) cycle peak of around $360 just days before the market experienced a brutal crash in the lead-up to Christmas. 
 
It was widely reported that he did this to avoid a “conflict of interest”.
 
 I believe he made the right move to distance himself from the project — especially if it claims to be decentralised — but he could have done a better job timing the announcement to have less impacted LTC prices. 
 
Considering potential regulatory issues with the US SEC, it was the right thing to do in the long run. This could influence the regulator’s decision about whether the altcoin is a security or commodity, which still needs to decide which altcoins fall into each category.
 
In conclusion, Litecoin will generate modest returns when factoring in opportunity cost. In other words, other altcoins (besides those I listed earlier) deserve more attention than the “silver to Bitcoin’s gold”.

How high will LTC go this cycle? Do you believe it remains a worthy investment? Leave your thoughts below.

Disclaimers

 
 • N.B. None of this is financial advice; I am not a financial advisor. You are ultimately responsible for crypto investments, let alone in any asset class.

• The opinions expressed within this piece are my own and might not reflect those behind any news outlet, person, organisation, or otherwise listed here.

• Please do sufficient research before investing in any crypto assets, staking, NFTs or other products affiliated with this space.

 •Bitcoin (BTC) accounts for about 25% of my crypto portfolio. Litecoin (LTC) makes up about 0.5%.

Featured image acknowledgements:

– Background by sersupervector at Freepik
– Bitcoin logo (public domain) by Wikimedia Commons
– Litecoin logo by koaasy at Freepik. Also available via Wikimedia Commons (CC BY-SA 4.0)