Litecoin or LTC is the third most popular cryptocurrency traded globally, which has enjoyed high levels of trading volume and liquidity in recent years. Like Bitcoin, LTC is also a cryptocurrency but it enjoys faster mining capabilities and has a larger cap of 84 million litecoins when compared with BTC. It is a completely decentralized, peer-to-peer driven digital currency launched to counter shortcomings seen in Bitcoin. Considered the silver to Bitcoin's gold, it has a market cap of over $9.5 billion as of February 2021.

While in the initial days since its launch, the Litecoin price did share a close correlation with that of Bitcoin, over time, the correlation has been weakening as their price trends have diverged. Some traders have noticed a positive correlation between the LTC rate and the rate of BTC, especially during Bitcoin rallies. On the other hand, however, there have been many instances when a crash in the value of Bitcoin has failed to cause Litecoin to turn bearish.

What Influences the price movements of Litecoin?

Litecoin underwent a rapid spike on NOV.4 following an announcement that MoneyGram was integrating LTC into its cryptocurrency store.

MoneyGram's chief executive officer Alex Holmes noted that cryptocurrencies would become an additive to MoneyGram's development strategy.

Litecoin's mining difficulty has been hitting fresh highs throughout October and November. A positive metric for Litecoin's decentralization. Mining difficulty is an indicator of how difficult it is to find a block hash and validate a block of transaction.

The Litecoin community is also waiting for the third halving event set to take place in July 2023. Market experts have already hinted out LTC price action is undertaking a similar trajectory as before the previous halving events.

Interestingly, the price of LTC undertakes a volatile price cycle just prior to any halving event. The price cycle involves a big price pump, then a massive correction, followed by a bottom and a recovery to a new high. At the moment, Litecoin is at the bottom stage and is preparing for an upward recovery nearing the halving event.

Litecoin's MWEB upgrade also had a positive impact on the price action of the altcoin. This upgrade enables Litecoin users to opt-in for confidential LTC transactions. However, owing to KYC requirements across major exchanges, the upgrade received a backlash from Binance and a few other exchanges.

If you are considering investing in Litecoin, here are some advantages of the Litecoin blockchain:

Scalability solution - Charlie Lee, Litecoin's founder intended to develop a highly flexible, high perfomance and scalable network. He and his team understood that Bitcoin would face long-term scalability issues once it grew in traffic. Such issues would be increased transaction fees, bottlenecks and scalability problems.

Perfomance speed - Litecoin is a lightweight version of Bitcoin. It is fast and has a shorter block time compared to BTC.

Low transaction fees - Ethereum and Bitcoin have been facing numerous scalability issues and one of the biggest problems is high transaction fees. Both blockchains have been trying to solve such issues through myriads of upgrades. Litecoin's vision was to build a lightning-fast blockchain, that would also be cheap to transact.

Confidentiality and privacy - Litecoin's core developer team is considering boosting privacy features and strengthening user anonymity. The developers already deployed the MimbleWible upgrade for creating single-chain transactions that are ultimately hidden from third parties.

Cross integration - Litecoin upholds the open software concept. The Litecoin Foundation aims to onboard as many merchants as possible who will implement the blockchain and accept LTC as payment.

LTC Breakdown

In June 2020, Litecoin announced that it had shifted from proof-of-work to proof-of-stake, making its mining more scalable and cheaper. Since then, Flare has announced an integration with this cryptocurrency, making it possible for users to perform Litecoin transactions on the Flare Network.

Early adopters of Litecoin have realized great fortunes investing in the cryptocurrency during the initial stages, seeing the Litecoin rate surging significantly over a period of time. However, over the years, the higher levels of volatility have made cryptocurrency a better trading instrument than an investment.

Litecoin History

Created by Charlie Lee - an MIT graduate and a former engineer at Google, Litecoin was launched in 2011 as an alternative to Bitcoin and enjoys a faster block generation rate and lesser transaction times than its larger counterpart. It is also based on a different algorithm than BTC - while Bitcoin uses SHA-256, Litecoin leverages scrypt for proof-of-work. Mining hardware for mining LTC such as ASIC miners or GPU mining rig is more complicated and expensive than those used to mine Bitcoin due to the use of the scrypt algorithm.

The LTC price had surged to a record high of $371 on 19 December 2017, rising by 500% in a span of only two months. Following this, its price crashed in 2018 when the whole world of cryptocurrencies suffered a setback, falling to a low of around $25 by December 2018. The cryptocurrency started 2019 on a bullish note, with the Litecoin rate reaching a high of $145 by June, only to fall back down to around $50 by H2 2019.

In 2020, LTC rate received a boost when PayPal gave it official recognition by adding Litecoin as a means of payment and made it more attractive to use for making payments. This sent its price soaring 450% higher in October 2020 to $185.

LTC Price Factors

Availability of Litecoin

The Litecoin price varies based on the number of Litecoins available for trading in the market. Some traders believe that the greater supply of Litecoins is one of the key reasons it has a lower value than Bitcoin - which has a far shorter supply.

Media coverage

LTC and the cryptocurrencies market overall are highly sensitive to news and the latest developments. While positive headlines that show cryptocurrencies as a promising and more acceptable mode of payment drive the Litecoin rate higher. On the other hand, negative updates surrounding Litecoin or the crypto market, in general, can cause the LTC price to decline.

Perception among financial institutions, large scale investors

Mainstream adoption of Litecoin and other cryptocurrencies is one of the biggest reasons that drive volatility in the crypto market. Even as individuals and some organizations tout the benefits of digital currencies, until it gains official recognition by regulatory authorities and financial institutions, larger investors are going to be wary of trading LTC/USD. Once this changes, trading volumes and liquidity would surge, increasing the Litecoin price.

Market capitalization

Even though it is nowhere near Bitcoin in value, the overall market cap of Litecoin still runs into billions, as of February 2021. When the market cap of Litecoin rises, more traders will be interested in buying it, causing LTC rate to rise.. On the other hand, a decline in market cap can cause a sell-off, leading to bearishness in this pair.

Value of Bitcoin

Litecoin, like most other cryptocurrencies, does share a correlation with Bitcoin - the largest and most popular digital currency. As a result, whenever the price of BTC rallies, it helps other cryptos trade bullish as well, though to a lesser extent. On the other hand, a sell-off in Bitcoin adversely affects the Litecoin rate, sending it lower.

Trading Litecoin

Trading LTC requires considerable care, skill and knowledge of fundamentals that drive volatility in the crypto market. Ensure that you are up to date on all the latest developments surrounding Litecoin before entering into trades and review trading guides or courses to get a better understanding of trading Litecoin before you begin. In addition to having effective fundamental knowledge, perform technical analysis on the LTC chart to gauge the possible trends and find a good position to enter into a trade.

Owing to the high levels of volatility, it is safer to enter long-term trades to prevent too many losses and to protect your capital. However, even when entering into long-term trades, it helps to keep an eye on the crypto market and the latest news that can impact it. You can then quickly react to any potential adverse event that can drive significant weakness in LTC price and close your trade manually to exit the market without taking on too much loss.