Litecoin price prediction (LTC)

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Litecoin has out-performed bitcoin over the past six months

5/10/14: Over the past six months, litecoin is up 490 percent, per Value Walk. That’s 3.5 times higher than bitcoin’s 140 percent gain over the same time period.

It’s hard to say why litecoin hasn’t fallen further, but I suspect it has to do with governmental actions against bitcoin in China. When the price of BTC spiked to $1,2000, much of that demand was driven by Chinese investors. Since then, the People’s Republic has taken a string of increasingly hostile stances toward the currency.

Litecoin on the other hand is still relatively new in China. In fact, it wasn’t until March of this year that China’s biggest bitcoin exchange announced that it would start offering litecoin trading (per Coindesk). In any event, litecoin’s relative strength compared to bitcoin is great news for investors.

Litecoin price prediction basics

While litecoin isn’t as rare as bitcoin, it’s still extraordinarily rare for a currency. There will only ever be 84 million litecoin created (vs. bitcoin’s 21 million). At the time of this writing, 28 million litecoin have been created and 12.7 million bitcoin have been created.

To put those tiny numbers in perspective, consider the fact that the the Bureau of Engraving and Printing printed 26 million U.S. bills (in various denominations) with a face value of approximately $1.3 billion in fiscal year 2013 (source). That doesn’t take into account electronically-created dollars and existing bills.

There are two primary factors driving the value of litecoin (and any altcoin):

  1. Usefulness
  2. Investment/Speculation

Litecoin has proven itself useful in limited areas. The coin’s unique in that it has garnered widespread adoption as a currency trading pair on currency exchanges. That means you can trade litecoin for bbqcoin, mintcoin or flappycoin without bitcoin being involved in the transaction at all.

However, litecoin lags bitcoin significantly when it comes to merchant adoption. Any future where litecoin is valuable must involve a significant volume of litecoin transactions. Not to worry, though. I suspect a PayPal-like payment processor that handles numerous altcoins will soon be available. That will make it easier for e-commerce sites to accept litecoin, ripple and other alternative cryptocurrencies. Indeed, I wouldn’t be surprised to see a company like Coinbase or Bitpay start processing litecoin transactions in the near future.

My litecoin price prediction

Part of litecoin’s appeal is the fact that it’s cheaper and easier to acquire than bitcoin. That means that if the price rises too high, it’ll lose some of its luster. I’m not sure what that price ceiling is. Currently, one litecoin is worth about 2.5 percent of the value of one bitcoin. In December, when bitcoin spiked north of $1,110, litecoin surged to $43. That was about 4 percent of the value of one bitcoin at that time.

Ultimately, my litecoin price prediction rests on the expectation that litecoin will consistently trade at a measurable fraction to the price of bitcoin: probably somewhere between 2 percent and 5 percent. So, the higher the price of bitcoin goes, the higher the price of litecoin goes. My personal price target in the near-term for bitcoin is around $10,000 (learn why here). If that ever happened, we could see litecoin prices around $200 (2 percent of the price of BTC) to $500 (5 percent of the price of BTC).

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