Do repost and rate:
If traders abandoned Litecoin why do investors accumulate LTC?
On-chain and trading data indicates that traders have abandoned Litecoin, but for some reason long-term investors are hoarding LTC.
As for the price, Litecoin (LTC) has had a pretty tough year and altcoin is currently down 51% in the last twelve months. Lack of activity on GitHub and planned protocol updates have led Litecoin co-founder Charlie Lee to admit that 2019 experienced a record low in the number of developers working on Litecoin Core, the software behind network nodes.
The beginning of 2020 was no different and Charlie Lee solicited two voluntary donations from LTC miners to help drive development funding. Uncertainties regarding Litecoin's future have caused investors to lose interest in the project and this is reflected in both the chain and LTC's trade metrics.
What's interesting is that while most would see investor disinterest as a negative factor, some have been quietly accumulating LTC.
What's interesting is that while most would see investor disinterest as a negative factor, some have been quietly accumulating LTC.
Litecoin's trading volume falls to 2-year low
Volume is the most relevant indicator of trader interest and Litecoin has failed miserably in this area . Trading volume on major exchanges has been trending downward for the past twelve months and has recently fallen to its lowest level in two years.
Litecoin average volume of 30 days. Source: TradingView
Litecoin ranks third in Nomic's transparent trading volume at $ 80 million per day. This is 50% above Bitcoin Cash (BCH) and EOS, but the figure remains 45% below the previous eleven months when there was a daily average of $ 146 million in volume.
A number of reasons could be behind the drastic change and it should be kept in mind that even less activity on exchanges does not necessarily translate into less use of blockchain, that has been the case.
On-chain metrics provide realistic information on transfers, fees, active addresses and many useful indicators that will be of interest to merchants.
Adjusted transfer value
The transfer value is a leading indicator in the chain that measures user activity since it adds up all the coins that are moved daily. CoinMetrics analysis provides more accurate data by adjusting these figures to exclude mixers and transactions between the same entities.
14-day average of Litecoin's adjusted daily transfer sum. Source: CoinMetrics
Adjusted daily transfers have been around USD 20 million, 83% below the maximum levels of 2019 . The current tier is comparable to Tezos (XTZ), a much newer and smaller cryptocurrency whose primary use case has nothing to do with fast or cheap transactions.
A noticeable drop in transaction fees
Charlie Lee's proposal included smaller block intervals than Bitcoin (BTC) and a simpler algorithm that removed signature from the original data for higher transaction output.
Such a move could have sparked substantial interest in Litecoin (LTC) in the past, but is no longer valid as users realized that 270 confirmations were needed to match the computing power behind Bitcoin's 3 mined blocks , according to Luke Childs' How Many Confirmations analysis.
Litecoin average rates per 14-day average transaction (USD). Source: Coinmetrics
Average LTC fees per transaction fell to $ 0.011, which is the lowest level since October 2015. Although many reasons could be behind this, including the use of 75% of SegWit, the previous daily transfer value analysis points to weak demand from its users.
While Bitcoin's average block size is more than 1.2 megabytes most of the time, Litecoin averages less than 0.2 megabytes despite both having similar capacity.
Low usage translates into small fees, reducing miners' interest and resulting in a negative feedback loop as investors pay attention to the processing power behind each blockchain.
Reduced hash rate
Litecoin hash rate. Source: CoinWarz
Litecoin's hash rate decreased by 45% since its halving in October 2019, generally raising concerns about a possible 51% attack . This unused processing power capacity could theoretically be used to compete with honest miners.
Either way, there is no positive reading that fewer miners direct investments towards Litecoin. Unlike trade, mining is exclusively a long-term commitment, as the payment generally exceeds a quarter and sometimes a full year.
Investors are hoarding instead of getting rid of LTC
After so many negative indicators, one would expect holder activity to show weakness as both price and network usage have been declining for over a year.
One could also mention the mediocre performance of recent code advancements, including the privacy capabilities of the MimbleWimble technology proposed in October 2019.
