On many levels, it’s been a very frustrating year for cryptocurrency advocates. Over the last 12 months or so, regulators have finally ramped up the “fight them” phase of the war. The SEC is making it up as it goes. The Wall Street Journal published a totally false hit piece on crypto market participants. The figures from which have been repeatedly used as justification for more “rules” by the who are losing their grip on the finance industry and a WASP in Taxachusetts who pretended to be a Native American on a Texas State Bar registration card.
However, in other ways, it’s been an absolutely phenomenal year for cryptocurrency. We appear to be closer than ever to a spot Bitcoin ETF. NFTs are apparently back. And we’ve seen many of these native crypto assets 5x or 6x year to date. However, there is one coin that I’ve been holding for quite some time that hasn’t done anything in 2023:
Yes, I’m talking about Litecoin ($LTC-USD). Calling it flat during a year when Bitcoin ($BTC-USD) is up over 150% would be generous. I like LTC. I have a bag of it. Is the thesis failing? Let’s find out. But first…
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Wen Moon?
Oh Litecoin, why must you torment me in this way? I look at the chart and the fundamentals for this crypto coin and I feel like I’m on an island for liking this coin. First, the technicals:
This is a coin that is putting up virtually no fight against BTC. The LTC/BTC ratio is now 0.001678 - I know that’s sort of a silly number, but LTC against BTC is in the basement. Look, longer term this trend against BTC is obviously not great. What it’s saying is that LTC is generally always losing value against BTC even if it goes up against the US Dollar. But there are times when LTC goes up against BTC and I think we’re beyond due for one of those moments.
The last time the LTC/BTC ratio was this low was in June 2022. At that point, LTC had bottomed and started its grind higher. That move ultimately took it from $40 to over $100 in January. Has there been a strengthening or weakening of the fundamental story for LTC in that time? Bitcoin’s halving events are generally seen as bullish for BTC. Litecoin’s halving event history is a bit more mixed. For example, we just had a halving on August 2nd, 2023.
Not only was the price of LTC at this halving behind the previous halving level, but even 12 months after that previous halving, LTC was 39% below the halving price in 2019. None of this is a great sign. But here’s what we know, there is even less LTC available to miners now than there was on August 6th 2019. And despite this reduction in block reward, Litecoin network hashrate just made a new all time high at the end of November.
Miners are still competing for the block reward even though LTC mining profitability has turned negative. Why? Ultimately, we’d have to ask them and I don’t know any LTC miners personally. But I suspect it’s because the chain is still being used and the market is simply mispricing the asset right now:
FWIW: this setup in transactions versus price is similar to what was observed on Avalanche ($AVAX-USD) earlier this year when AVAX was under $15. It’s currently about $27. I don’t know. But I still think we’re going to get another rip well over $100 per coin.
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