What is Behind the Recent Resurgence of Litecoin (LTC)?

Litecoin (LTC) is the best-performing token in this bear market. Emerging as the rare winner in the ongoing downtrend, LTC went on to hit about $83 on Wednesday, a level last seen almost six months back in May 2022. However, as of writing, LTC is trading at $78.

That said, the coin is still down 81% from its all-time high of $410 that it hit in May 2021. Still, these gains have helped Litecoin acquire the status of the thirteenth largest cryptocurrency with a market cap of $5.6 bln today.

Thanks to this price action, LTC now ranks higher than Avalanche (AVAX), Uniswap (UNI), Tron (TRX), Solana (SOL), and Shiba Inu (SHIB).

However, Litecoin's growth is not just limited against the USD but also BTC and ETH, the two largest cryptocurrencies by market cap. For instance, in the past month, LTC has recorded a positive change of 69% versus BTC and 70% against ETH.

Compared to Bitcoin alone, which is down more than 14% in the past month, Litecoin is in the green by nearly 50%. In fact, in the last two weeks alone, the LTC price has jumped 55%. Moreover, the LTC/BTC price soared to new heights, hitting a yearly high of 0.003970 BTC on November 22.

Litecoin is actually one of the very few OG coins that managed to hit new highs during the bull market of 2021. However, the new ATH wasn't even 2X of the 2017 high of $370.

But why is the 2011-born altcoin rallying exactly? Well, there could be several factors at play here. Let's check them out!

Upcoming Halvening to Reduce Supply Issuance

Historically, Litecoin has seen a bearish-to-bullish trend change in the months leading up to the mining reward halving. So, this is likely happening this time as well. Historically speaking, LTC broke out of its prolonged downtrends and led bitcoin higher in the run-up to the 2015 and 2019 halvings as well.

To crypto natives, the ongoing rally might be reminiscent of the same trend. And traders, be it in crypto and traditional markets, tend to be forward-looking and factor in bullish and bearish events.  As such, Litecoin's divergence from the broader cryptocurrency market downturn that started earlier this month could be propelled by the impending positive change in its supply dynamics called the halving.

This will be the third mining reward halving for Litecoin, the last two occurring on August 26, 2015, and August 5, 2019. And this is why LTC is again showing signs of life eight months ahead of the third halving.

The halving is fast approaching, set to occur on August 3, 2023, at 14:48:00 UTC. This event will see the reduction of Litecoin's block reward from 12.5 LTC to 6.25 LTC, and it's something that's highly anticipated by the Litecoin community.

As part of Litecoin's coin issuance, miners are rewarded a certain amount of LTC for every block produced. When Litecoin first started, 50 LTC per block was given as a reward to miners. And after every 840,000 blocks are mined, or approximately every four years, the block reward halves and will keep on halving until the block reward per block becomes 0, which will happen approximately in 2142.

Much like Bitcoin, Litecoin was designed as a deflationary currency. And by decreasing the rate at which new Litecoins are created, the asset becomes scarcer over time. So, as per market factors at play, Litecoin's price is expected to rise if demand for it increases over time while the asset becomes scarcer.

With the halving just around the corner, traders and investors might be getting into LTC to capture any price increases in the future.

FTX Implosion Affecting Market Sentiments

This month, the cryptocurrency market took a big hit as cryptocurrency exchange FTX collapsed and filed for Chapter 11 bankruptcy protection as a result of gambling of customer funds and conflicts of interest.

The recent implosion of the FTX cryptocurrency exchange has sent shockwaves through the market, with many investors left scrambling to recoup their losses. The collapse also had a negative effect on market sentiment, with many now feeling much less confident about investing in cryptocurrencies.

Surprisingly, Litecoin has emerged as one of the rare winners in the ongoing cryptocurrency market meltdown led by the FTX's collapse, despite most cryptocurrencies feeling the heat of this uneventful situation.

The implosion of the centralized cryptocurrency exchange is serving as a stark reminder of the importance of sound projects in the crypto space. The event has scared many people from more speculative and manipulated tokens. As such, they may now be looking for more stable or time-tested options.

The collapse of FTX further highlights the importance of due diligence as far as investing in cryptocurrency is concerned. While there are many projects with great potential, there are also many that are simply too risky. And by understanding the difference between these two types of projects, investors can avoid getting caught up in the boom and bust cycle and instead focus on investing in sound projects with a solid foundation.

Moreover, in the aftermath of the FTX debacle, the popular PoS blockchain, Solana, also slipped below that of the OG PoW blockchain, Litecoin. For those that don't know much about SOL, the native token of the Solana ecosystem, it has been one of the best performers of the bull market and was known for its recovering ability in a downtrend.

But that's no longer the case, which also reflects in SOL's price performance. Statistically speaking, SOL began 2022 trading at nearly $180 with a market cap of $55 billion, and today it is trading at around $14 with a market cap of a mere $5.14 bln. Once dubbed the “Ethereum Killer,” Solana allows developers to create dApps and NFTs.

In contrast, Litecoin began this year at $151 with a market capitalization of $10.47 billion. Fast forward to November 24, 2022, and Litecoin is trading near $80, a drop of only 47%. Amid all these, one thing is absolutely clear, and that is, for now, investors have pretty much given up on shinier investments and are looking for safer options.

Litecoin vs. Bitcoin: What Makes Litecoin the Silver to Bitcoin's Gold?

Litecoin (LTC) is often referred to as the silver to Bitcoin's gold. After all, both cryptocurrencies boast many of the same benefits, including decentralization, security, and anonymity. In Litecoin's case, it is an open-source cryptocurrency project aiming to be a global payment that enables fast and near-zero cost payments to anyone worldwide. It is a fully decentralized network without any central authorities, similar to Bitcoin.

The cryptocurrency received an endorsement from none other than Michael Saylor, the CEO of MicroStrategy, a hardcore Bitcoin supporter whose company holds BTC on its balance sheet. Saylor described Litecoin as a Bitcoin-like “digital commodity” and a store of value.

Litecoin actually has several advantages over Bitcoin, including faster transaction times and lower fees. It is also more accessible to everyday users, as it can be mined with less expensive hardware. These reasons make Litecoin a popular choice for investing in major cryptocurrencies.

The cryptocurrency has also been gaining adoption as a payment method. Therefore, more and more businesses are accepting LTC as a payment form, increasing the demand for coins.

After the centralized exchange FTX went down, where a handful of people were calling all the shots, the decentralization, permissionless, and transparent nature of Litecoin is becoming increasingly important in the crypto sector.

This could be why, leading up to its pump, Litecoin saw a strong accumulation trend among “sharks” that sent it to a seven-month high held supply. According to the crypto analytics platform, Sanitment addresses holding 1k to 100k LTC tokens piled up more than $43 million over the past two weeks.

A similar trend was seen among Litecoin whales, which refers to those holding one million to 10 million LTC tokens. These whales have been seen increasing their LTC bags by 2.7 million, which could very well have further catalyzed its price action.

Litecoin also Benefits from Bitcoin Adoption

Another potential driver of LTC demand could be the fact that it benefits from BTC in several ways. Firstly, as BTC becomes more popular and expensive, LTC becomes a more affordable alternative for those looking to invest in cryptocurrency.

As BTC becomes more mainstream, LTC also benefits from the increased awareness and interest in cryptocurrency in general. Not to mention, as BTC becomes more regulated, LTC benefits from the increased legitimacy that comes with this regulation.

Moreover, this cryptocurrency is usually among the few coins adopted by mainstream institutions that want to get into crypto but do not want to take extreme risks. As such, whenever these institutions adopt Bitcoin, Litecoin can be found among a handful of coins supported.

Being based on the same principles as Bitcoin, Litecoin can also be used as a hedge against inflation. On top of that, the crypto asset also has a maximum supply capped at 84 million compared to fiat currencies. This is opposite to fiat currencies like the US dollar, which experiences inflation over time as their monetary supply increases, leading to a decrease in their purchasing power.

The network of Litecoin, meanwhile, is secured by mathematics and empowers individuals to control their finances. So, with a much higher total supply, substantial trade volume liquidity, and industry support, Litecoin has all the traits to become a medium of commerce.

Continuation of Uptrend or is it Over?

After touching $83, the LTC price has experienced downward pressure and is currently down by 6.9%. As such, it is yet to be seen if the cryptocurrency can manage to have another leg upward or if it's time for LTC to go back down and find the bottom.

While a combination of factors like the upcoming halving and investors looking for safe choices are driving Litecoin prices higher, the fact remains that crypto is in a bear market. Thus, with Litecoin's price already showing signs of bullish exhaustion, it will likely experience a correction.

Moreover, the technicals, like the relative strength index (RSI), also show that the LTC/BTC pair is overvalued. For instance, on November 22, LTC/BTC's weekly RSI surged above 70, which is considered to be an overbought condition and seen as a sign of an impending bearish reversal.

While LTC decides its next direction, Charlie Lee, the creator of Litecoin and Director at the Litecoin Foundation, joined Upstream, a blockchain-based trading app for NFTs and digital securities powered by Horizon Fintex (Horizon) and MERJ Exchange Limited (MERJ), as an advisor to usher in “the next generation of blockchain-powered securities and NFTs for the masses.”

Lee, a former software engineer at Google and engineering director at Coinbase, will also be working with Upstream on initiatives to expand the trading app's crypto payment ramps.

“Just as Litecoin set out to address Bitcoin's accessibility and transaction speeds, Upstream's methodology works to bring transparency and instant settlement to securities trading and utility-driven NFTs and longevity to the NFT market,” said Upstream co-founder Brian Collins.

Final Word

Although Litecoin's recent price increases could also simply be due to market speculation, there's no denying that it has all the signs that it is one of the most fundamentally strong cryptocurrencies. After all, as one of the oldest and most established cryptocurrencies with a strong track record, Litecoin has been gaining traction among investors for years.

More importantly, the market is currently experiencing a period of consolidation as investors take a step back and reassess the risks involved. In the short term, at least, the crypto market is likely to be much more subdued as a result of the FTX implosion.

So, while in the short term, Litecoin, in tandem with the rest of the crypto market, may go down, it can see an uptrend in the medium term, especially with the halving on the horizon. However, if the cryptocurrency manages to gain adoption and find its niche and narrative, it can very well get traction in the long term as well. Click here if you would like to know all about investing in Litecoin.