Litecoin’s market price follows Bitcoin, but on a much smaller scale. This is because market prices are a function of market sentiment, economic factors, risk tolerance, investor and trader preferences, hype, news, and other factors that affect investment prices.
Litecoin is not as popular as Bitcoin. Probably because it doesn’t get as much attention as older cryptocurrencies. However, in terms of 24-hour trading volume, it remains in the top 20 most traded cryptocurrencies. As the second oldest cryptocurrency, this is significant as it shows that it still has a lot of investor interest. Here’s why Litecoin has lasted almost as long as Bitcoin and why it tends to follow its price.
Important points
Litecoin was one of the first “altcoins” to create a new cryptocurrency based on Bitcoin’s original open source code, and is still active today. Since Bitcoin remains the dominant cryptocurrency, other major altcoins such as Litecoin tend to follow its price. Litecoin’s creators and other supporters have referred to it as the silver to Bitcoin’s gold.
Litecoin is a fork from Bitcoin
Litecoin is a fork of Bitcoin, created in 2011 after developer Charlie Lee decided that Bitcoin needed some improvements. He also believed there was a need for a cryptocurrency similar to currencies used in the past that would complement that use case. Therefore, Litecoin was created for the same purpose as Bitcoin: as a payment method that can be used alongside Bitcoin.
The concept of “Bitcoin’s silver to gold” refers to how silver and gold were used as currencies in the past and has been (and still is) oft-cited. One is more valuable and rare than the other (gold), so it makes sense to make small trades with the less valuable and more abundant one (silver). Lee intended for Litecoin to be used in much the same way as silver and other metals supplementing gold.
A fork from Bitcoin created a cryptocurrency in which much of the coding remained the same. To ensure that Litecoin does not directly compete with Bitcoin, several adjustments have been made to the total number of coins made available, adoption rates, and mining methods.
Why Litecoin follows Bitcoin price
As Litecoin matured, it began to be adopted as an investment and speculation opportunity, following in the footsteps of Bitcoin. Investors and traders began treating it the only way they knew how, as a potential way to generate income and profits from price fluctuations.
Investor treatment
The sentiment and strategies of the commodity and stock markets carried over to the crypto market. Each cryptocurrency then developed a base of investors and users, rising and falling in popularity. Bitcoin has emerged as the top favorite for speculative investors, while Litecoin has fallen further down the list. However, like other altcoins, it was traded in the same way as Bitcoin.
It makes sense that the market price of Litecoin logarithmically follows the market price of Bitcoin. This is because the price of Bitcoin is so high that the difference becomes more noticeable. As the price of Bitcoin increases, the price of Litecoin, like other cryptocurrencies, will start to resemble the price of Bitcoin to some extent.
trading view
people who influence prices
Similar to Bitcoin, supply and demand may be the most important influence on Litecoin’s price. The supply of Bitcoin is limited to 21 million. The maximum supply of Litecoin is 84 million, which is four times that of Bitcoin. Litecoin also has a delayed halving schedule as it was released two years later compared to Bitcoin.
Litecoin, like Bitcoin, halves its rewards every four years. Bitcoin will undergo halving in April 2024, reducing the reward to 3.125 BTC per block. Litecoin will have its next halving event in 2027, when the reward will drop to 3.125 LTC per block. However, after the next halving, there will be more LTC left than there was Bitcoin in the previous event.
Many investors are concerned about acquiring as much Bitcoin as possible as the pace of new coin issuance slows. Litecoin is not yet as much of a concern for investors as new Bitcoins are still available. No one knows how long this will last, but there may come a time when investors look to other cryptocurrencies for income and profits.
Is LItecoin related to Bitcoin?
Litecoin is a fork of Bitcoin and has been used in the past as a kind of testbed for improvements. It also tracks Bitcoin price movements on a much smaller scale, but is not linked to Bitcoin.
What altcoins will follow Bitcoin?
The prices of many altcoins follow Bitcoin, as it is the cryptocurrency that sets the standard and pace. Litecoin, Ether, Dogecoin, and many other coins have trends that mimic Bitcoin.
Is Litecoin a clone of Bitcoin?
In a way, yes. This is a hard fork redesigned to complement Bitcoin as a lower value, more abundant additional currency.
conclusion
Litecoin is primarily treated as an investment and tradable product, so it follows Bitcoin’s price trends. The trend is similar to Bitcoin, but the market price is much lower because investors don’t place as much value on Bitcoin.
Comments, opinions and analyzes expressed on Investopedia are for informational purposes only. Please read our warranty and disclaimer for more information. As of the date this article was written, the author owns BTC and LTC.
