“Is Now The Time To Invest In Litecoin?”


If you had to make a list of major cryptocurrencies that disappointed you the most in the past year, Litecoin (LTC -0.93%) would be a good place to start. Only 17% of the population is able to access broadband, compared with 52% in Ethereum (ETH -0.11%) and 75% of the total Bitcoin (BTC 0.17%).

But the story of Litecoin’s underperformance doesn’t end there. A key driver of the digital currency’s long-term prospects has become more cloudy than expected at the start of the year. Let’s take a closer look.

The Catalyst That Wasn’t

The key catalyst for a major price increase was expected to be the Litecoin halving, which occurred on Aug. 2. Halving events are when the reward for mining new blocks on the blockchain is cut in half. This is a crucial technical event that affects factors such as scarcity. Halvings only happen every four years, and the three prior halvings in 2011, 2015 and 2019 were associated with gains in crypto prices.

Investors had good reasons to be optimistic about the new halving. Crypto analysts were even predicting a price of up to $500 for Litecoin.

Unfortunately, one week after the halving it already looks like a disaster. In the past seven days, the price has dropped by 12%. It was expected to break the $100 mark. Now, with the crypto trading at only $82, it looks like it’ll break through the $80 threshold on its way down. This was not expected to happen.

Hopeful Signs From Institutional Investors

That being said, institutional investor support is a major factor. In June, a consortium of institutional investors, including Fidelity Investments, Citadel Securities and Charles Schwab, launched EDX Markets, a cryptocurrency exchange exclusively for institutional investors. Just four cryptos were planned for trading: Bitcoin, Ethereum, Bitcoin Cash (BCH -0.22%) and Litecoin.

It has now surpassed the $100 mark. The investment thesis was straightforward: as more institutional investors pour their money into digital coins, the price will increase.

Earlier this summer, large investors (the so-called “whales”) were buying into Litecoin. The market was excited as the seller seemed to know something the rest of us didn’t.

Should You Buy Litecoin?

The chance to rally post-halving is disappearing. It’s very frustrating that the halving date was pushed back. Every major crypto investor had circled Aug. 2 on their calendars. They’ve known about this catalyst for over four years.

From my perspective, it wasn’t the halving that caused the sudden influx of money from institutions, but rather the launch of EDX Markets. If you’re still considering buying Litecoin, you should pay attention to the behavior of institutional investors. Look for any signs that institutional investors have moved into Litecoin, as this is still the one thing that can save it in the end.

At the end of the day, I don’t think you should buy Litecoin while it’s down. You’re better off buying Bitcoin instead of worrying about Litecoin.

Dominic Basulto has positions available in Bitcoin and Ethereum. The Motley Fool’s disclosure policy is in place.

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