Fundamental Analysis

Litecoin Trading: A Brief Guide for Beginners

Why you should be trading Litecoin, the digital silver in 2021


Litecoin (LTC) is one of the oldest and most popular cryptos on the market. It is often called “digital silver to Bitcoin’s gold”, and for good reason. On the technical side, both cryptos have a lot in common but LTC is a lighter and more affordable alternative.

To assess its profit potential, read our brief Litecoin guide explaining how this asset works and what its value stands on.

At the time of writing (Aug 2021) Litecoin’s market cap is well over $11 billion. The price of 1 LTC is around $160, but it keeps bouncing up and down, providing traders with excellent profit opportunities.

Going to trade on LTC using the Olymp Trade platform? Before you start, have a closer look at this crypto that once was ranked 2nd by market cap. Now, this position is occupied by Ethereum (ETH), Vitalik Buterin’s crypto described in a separate article.

Okay, let’s start with some history.

 

Creating Silver from Gold – How LTC was Launched

LTC is a hard fork of Bitcoin, meaning Litecoin’s developer used the source code of the Bitcoin blockchain. The new coin was launched in 2011 by Charlie Lee, a computer scientist and a famous crypto influencer who is now the Managing Director of the Litecoin Foundation.

Unlike most emerging cryptos, the new project sought to complement and not to challenge the market leader. As the name suggests, the idea was to create a lightweight version of BTC that was more convenient for everyday payments.

Until December 2017, Lee was also one of the most prominent LTC investors. He then decided to sell or donate nearly all his holdings to avoid a conflict of interest as some people accused him of pumping his own coin through his tweets. Interestingly, this decision made many crypto investors believe that Litecoin’s creator was no longer confident in its long-term success.

 

Similarities & Differences Between BTC and LTC

Both Bitcoin and Litecoin are financial tools that enable people to send/receive money over the Internet. They stand on the same values (transparency, decentralization, security) and the same source code.

Both cryptocurrencies can be divided into much smaller units (Satoshi and Litoshi), making them more affordable for investors. Both have a capped total supply, meaning the number of coins that can ever be in circulation is limited. Finally, both coins are issued through the Proof-of-Work (PoW) mining method. At the same time, Litecoin relies on a more eco-friendly algorithm that wastes less energy and doesn’t require any powerful and pricey hardware.

So, what exactly makes Litecoin lighter than its parent? For a non-tech user, there are three main differences:

  • Total Supply
    84,000,000 LTC vs 21,000,000 BTC
  • Block Time
    Litecoin miners need around 2.5 min to solve a new block. For Bitcoin, it’s approximately 10 minutes.
  • Transaction Fees
    The average transaction fee for the Litecoin blockchain is $0.014. Compare that to Bitcoin’s $2.40 (in August 2021).

What do these tech specs mean to an everyday user?
Compared to BTC, Litecoin is much faster and cheaper to use. Also, its network is more scalable meaning that it is capable of processing more transactions per second. While BTC is better for storing/moving big amounts of money, LTC is a light-duty coin that is better suited for buying a cup of coffee. Yet, you should keep in mind that few merchants accept LTC as payment, so the coin’s utility is still limited.

 

Should You Trade Litecoin?

Litecoin has been around for a while, and it’s one of the market’s all-time favorites. Right now, LTC doesn’t rank among the Top 10 cryptos, but it’s still one of the largest altcoins by market cap and trading volume. Hence, Litecoin is considered a highly liquid asset. Very few of the more than 4,000 cryptocurrencies on the market can make this claim.

To sum it up, LTC is a good choice for a trader. Like most altcoins, it is very volatile compared to traditional assets. Below is an example of Litecoin’s price dynamics over the past four months (May 2021 – Aug 2021).

  • Aug 16: $188
  • August 3: $143
  • July 20: $114
  • July 04: $147
  • June 15: $181
  • June 3: $197
  • May 18: $318
  • May 10: $412 (all-time high)
  • May 1: $278

The traders who did the right thing at the right time made multiple profits. In 2021, the price swings are still big, and are very inviting for those who want to take advantage of them.

 

How and Where to Trade on Litecoin

Litecoin is one of the crypto assets available on the Olymp Trade platform.
You can trade LTC in both the Forex and Fixed Time Trade modes:

  • FTT (Fixed Time Trade)
    Make a trade for a limited time frame and get a fixed rate of return if your forecast of Litecoin’s price movement direction is correct.
  • FX (Forex)
    In this mode, your trade has no time limits. You can close your position manually or automatically when the price of Litecoin reaches a certain value.

As always, we recommend newbies to practice on a demo account. It will help you gain experience with crypto without putting your capital at risk.

 

Factors that Influence Litecoin Prices

As you probably know, most cryptos are very volatile. LTC is no exception here.
How can you forecast where the price will move next? Here are some hints.

  • Litecoin’s price dynamics follow those of Bitcoin because both cryptos are closely related. So, if you see BTC surge, LTC is likely to follow the uptrend and vice versa.
  • The price depends on the supply-demand ratio. As we mentioned, new LTC coins are issued through mining, and their total number is limited. With every 840,000 blocks solved, a planned event called “halving” takes place when a miner’s reward for solving a block drops by half.

Long story short, halving is a built-in anti-inflationary mechanism that controls the speed of mining and issuance of new coins. Thus, it maintains a coin’s scarcity and preserves its value. The next Litecoin halving is scheduled for August 2023. Normally, halving makes the price of a coin grow. Sometimes it happens ahead of this event.

  • Any crypto is highly sensitive to positive or negative news and rumors. For example, if most investors are sure that Charlie Lee sells his LTCs because he doesn’t believe in his own coin’s future, its price may tumble on the news. Remember what Elon Musk’s tweets do to BTC’s price.
  • The price of a crypto may grow due to new use-cases that speed up its mainstream adoption. For instance, LiteBringer, one of the popular blockchain-based games, uses Litecoin as an in-game currency. Potentially, the success of this game may increase demand for LTC, driving its price up.

Again, remember how BTC’s price reacted to the news that Tesla would accept this crypto as payment for its cars.

 

Let’s Recap

In 2021, Litecoin is still a very good asset to trade, especially if you have no problems with self-control. We can never say it enough: any crypto is a high-risk/high-return asset that should be approached with a cool head.

Ready for Litecoin trading? Go to the Olymp Trade platform to make the most of this crypto’s ups and downs.

Related posts
Technical Analysis

Indicator StochRSI

The technical indicator StochRSI is a hybrid of two other indicators, Stochastics and the Relative Strength Index (RSI). The StochRSI indicator took the best of these two...