Litecoin (CRYPTO: LTC), which was launched in Oct. 2011, started trading at $0.30 per token. It reached an all-time high of $412.96 in May 2021, but it now trades at about $54.
A $1,000 investment in its first trade would have grown to $1.38 million before shrinking back to about $180,000 today. That 17,900% gain is still impressive, but some investors might think Litecoin is losing ground to leading cryptocurrencies like Bitcoin (CRYPTO: BTC). Let’s see why it’s still relevant in today’s crypto market — and where it might head over the next few years.
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What sets Litecoin apart from other cryptocurrencies?
Charlie Lee, a software engineer at Alphabet‘s Google, created Litecoin by forking Bitcoin’s open source code and tweaking a few parameters. Lee accelerated Litecoin’s block time (the average time it takes to verify transactions and generate a new block on the blockchain) to 2.5 minutes, compared to Bitcoin’s 10 minutes. He also set Litecoin’s supply at 84 million tokens, compared to Bitcoin’s 21 million.
Litecoin still uses the same energy-intensive proof-of-work (PoW) consensus mechanism as Bitcoin to mine its tokens. However, Lee switched Litecoin from Bitcoin’s SHA-256 algorithm, which required more powerful application-specific integrated circuit (ASIC) miners, to Scrypt. This memory-intensive algorithm was initially more accessible to ordinary CPUs and GPUs. Like Bitcoin, Litecoin underwent “halvings” every four years to cut its mining rewards in half. Those halvings made Litecoin harder to mine, and it can now only be mined profitably with ASIC miners.
Why is Litecoin still relevant?
Litecoin’s first exchange-traded fund (ETF), the Canary Litecoin ETF (NASDAQ: LTCC), hasn’t attracted much attention since its approval and market debut last year. It also hasn’t attracted as much interest as Bitcoin as a mainstream asset or a hedge against inflation.
However, investors shouldn’t ignore Litecoin because it still has a few catalysts on the horizon. First, it’s faster than Bitcoin and is often used as a “testbed” for Bitcoin upgrades. Second, Litecoin can be valued by its scarcity, as its scheduled halvings make it more difficult to mine.
Lastly, it’s “merge mined” with Dogecoin (CRYPTO: DOGE) — meaning that they share the same mining solutions and can be mined simultaneously with the same computing power. Therefore, any bullish sentiment toward Dogecoin would likely also drive Litecoin’s price higher.
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