It is not surprising that Bitcoin (BTC), being the first cryptocurrency, is considered the king of cryptocurrencies. This title is backed by the explosive growth of the price of Bitcoin over the years.
Litecoin (LTC), on the other hand, could be considered the red-headed stepchild of the crypto world. Chances are that few people would guess that Litecoin is the second oldest cryptocurrency. The price performance of LTC over the years has also been impressive. But it still seems to be overshadowed by Ethereum, BNB, Dogecoin and a host of other altcoins.
Created in 2011 by former Google employee Charlie Lee, Litecoin is a Bitcoin blockchain fork with updates and changes. Litecoin was designed as a cryptocurrency with near-instant transaction times and low network fees. The current circulating supply is 71,000,756.28, and the total and maximum supply is fixed at 84 million.
It can be challenging to trade any asset class, whether it is stocks, commodities or cryptocurrencies. The truth is that most traders, over time, lose money. Many of these failures can be attributed to people who fail to learn the basics before risking their capital. Emotions also play an important role; if you can’t control them, your chances of success are very low.
Another vital advantage many traders fail to exploit is finding their trading edge over the market. This trading edge can be a technical or strategic advantage. A strategic advantage could be a specific trading strategy that you have developed. A technical advantage could be using particular technical indicators and technical analysis to give you an edge. The greater your edge or advantage is over other traders, the greater your chances for success.
Technical analysis is a trading discipline used to evaluate investments and identify trading opportunities in price trends and patterns seen on charts. Technical analysis relies heavily on financial charts, data and statistics to uncover an investment's strengths and weaknesses. Traders can use it to attempt to forecast future trends and capitalize on them.
Because most cryptocurrencies use public blockchains, data is stored on the blockchain for anyone to see. Cryptocurrencies are the only asset class where all trading and investment activity can be extracted from the public ledger. As such, blockchains offer a wealth of open financial data that analysts can use to measure the network's transaction activity and utility at a given time. Smart crypto traders use this on-chain analysis to generate trading signals.
Traders can comb through the tons of on-chain data for themselves, or they can use one of the on-chain analytics platforms. One such platform is called IntoTheBlock. IntoTheBlock describes itself as “a data science company applying cutting-edge research in AI to deliver actionable intelligence for the crypto market.”
IntoTheBlock has a comprehensive dashboard that compiles much of the on-chain data into visual representations. These graphs and charts make it quick and easy to determine the market sentiment for a cryptocurrency. Although not perfect, combining technical and on-chain analysis can give traders a significant advantage over the market.
Litecoin On-Chain Trading Signals Analysis
Holders Making Money at Current Prices
Global In/Out of the Money is one of the most useful Litecoin trading signals. It classifies wallet addresses based on whether they are making money, breaking even or losing money at current prices. The addresses are clustered together based on previous buying at a specific price range.
Using this metric, traders can better understand locations for support or resistance levels. For instance, a large cluster of addresses could be losing money at a specific price. When the price rises to that level, many of these addresses may look to sell just to break even, creating selling pressure or resistance at that price.
Conversely, if more addresses are making money at the current price, that would be a positive for the network because of less selling pressure from holders looking to get out at break even. Knowing price levels where these in-the-money addresses bought could also give traders a clue to the location of support levels.
This metric alone can give traders valuable information about market sentiment. The result is a great visual representation of traders' position distribution across a broad price spectrum.
Holder’s Composition by Time Held
This subsequent metric groups investors by how long they have held positions:
- “Hodlers” are seen as long-term investors.
- “Cruisers” are seen as mid-term holders or swing traders.
- “Traders” are seen as price speculators.
This data can give you a visual representation of investor-trader sentiment towards a particular cryptocurrency. Ideally, if you plan to invest in a cryptocurrency long term, it would be better to see most addresses as hodlers, indicating that many people believe in the project's long-term viability.
Litecoin Addresses by Time Held
This Litecoin chart shows that most addresses since 2018 have oscillated between the hodler and cruiser categories, with cruisers currently at a majority. This metric could indicate skepticism among traders about the long-term viability of the project.
Concentration by Large Holders
This metric divides addresses by the amount of Litecoin (LTC) they hold. This data can be used to gain insight into the sentiment of other investors. A concentration of addresses that contain large quantities of a specific cryptocurrency could indicate investor confidence.
Litecoin Addresses by Holdings
Looking at the Litecoin chart, you can see that the blue line by far is the largest group. Unfortunately, this is the smallest group by balance at 0 to 0.1 LTC, and the current price puts these balances at less than $6. As a percentage, these addresses make up over 78% of all holders. As a result, a small percentage of holders hold the vast majority of LTC, which is never good.
Exchange Inflows and Outflows
Exchange inflows and outflows can be important trading signals for Litecoin traders to watch. A spike in centralized exchange inflows can indicate that holders are looking to sell. Spikes in exchange inflows also tend to precede spikes in volatility. Knowing that there is a potential for increased selling pressure and increased volatility is critical information for traders.
Conversely, an increase in exchange outflows can be interpreted as a bullish sign, with holders opting to store their crypto off centralized exchanges.
Is Now a Good Time to Buy Litecoin (LTC)?
Whether or not now is a good time to buy LTC or any other crypto is a decision every investor-trader needs to make for themselves. These Litecoin trading signals can be useful in making an educated decision but they shouldn't be the only info you consider.
The crypto market has been mired in a bear market for about the last nine months. Whether or not Bitcoin has bottomed is still unknown. If Bitcoin’s market cycle repeats as in the past, that would indicate a substantial amount of time before the next bull market. The next halving is estimated to occur in April of 2024, and bull markets historically have not begun in earnest until after a halving.
What this means is, most likely, there is plenty of time to build new positions. The safest way for most people to do this is to dollar-cost average over an extended period. Dollar-cost averaging helps to eliminate the need to try and time the market.
How to Buy Litecoin (LTC)?
Because Litecoin (LTC) is one of the OGs of the crypto market, it is available at many exchanges worldwide. Below is a list of the necessary steps to buy LTC.
- Open an account at a crypto exchange. You will most likely be asked to verify your identity during this process.
- Link a bank account to your exchange account. On many exchanges, you can also use a credit or debit card.
- Get an excellent hot storage wallet like Exodus or Atomic.
- Invest in a cold storage wallet like Ledger or Trezor.
Listed below are some of the more reputable exchanges.
- eToro
- Webull
- Crypto.com
- Binance and Binance.US
These exchanges are reputable and have user-friendly trading platforms. Always store your crypto in hot storage or, better yet, a cold storage wallet. Never store large amounts of crypto on exchanges.
Cryptocurrency is offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk.
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.
How Does Litecoin Fit Into the Bigger Picture?
Litecoin had a comfortable top 10 market capitalization ranking until June 2021, when it slipped to #13; it now sits at #21. Litecoin is also one of a few older coins that didn’t set a new all-time high in 2021. Even though Litecoin has stood the test of time, it must be asked, have newer projects passed it up?
Litecoin could be thought of as the silver version of Bitcoin, and the on-chain data shows that Bitcoin consistently outperforms Litecoin. When comparing the price performance from the low in December 2018 to the peak in 2021, Bitcoin came out on top again, gaining 2,088% to Litecoin’s 1,767% gain. Transaction speed is another story; with 2.5-minute block times vs. 10 minutes for Bitcoin, Litecoin comes out on top.
Comparing Litecoin and Dash, looking first at transaction speeds, Litecoin is quite a bit slower, taking 2.5 minutes vs. less than 5 seconds for Dash. Next, comparing the maximum supply of each, Litecoin has 84 million to 18.9 million for Dash. Looking at market capitalization, Litecoin currently sits at $3.8 billion, and Dash is at $481,403,991.
Of the two, it would appear that Dash has the potential for outsized gains vs. Litecoin, but ultimately that is up to the market. These comparisons may not seem favorable to Litecoin, but as stated earlier, Litecoin has stood the test of time. Litecoin isn’t going anywhere and, at the current price, looks to have substantial upside potential.
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About Donald Hancock
Donald’s expertise lies in the technical analysis of both stocks and crypto.