Litecoin, while being one of the most successful original altcoins, has generally been overlooked by crypto investors over the past couple of years. However, in 2017, Litecoin was on top of the world for many reasons. For one, it enjoyed a comfortable position within the list of the top ten cryptocurrencies. For another, the coin’s founder, Charlie Lee, was one of the most popular crypto personalities on Twitter (NYSE: TWTR), able to move markets with a single tweet.
At its 2017 height, Litecoin was trading at US$360 each, a record held until May 2021, when it topped out at US$413. Notably, Litecoin’s new fresh high was not that much more than its 2017 high. This is notable if you compare it to other coins that ballooned far beyond their respective 2017 heights. Take Bitcoin, Ethereum, and Doge, for example; the worst performing of these three was Ethereum, yet still clocked in a fresh 2021 record 169% above its 2017 high.
Litecoin is currently floating just outside the list of the top ten crypto projects, at number fourteen. While comfortable in the top twenty, it is frequently jostling for position in the capitalisation hierarchy with the assets on either side of it, Chainlink and Solana.
I do not think it will re-enter the top ten list. Although, I do appreciate several characteristics of the coin; It has a low-ish circulating supply, it has been around for a decade, and the Litecoin Foundation has initiated some exciting projects (e.g. Litecoin/Visa cards that easily transfers Litecoin to cash at a point of sale)
However, its value proposition is a little less sexy than other projects. As such, Litecoin doesn’t generate the same media or public interest as its compatriots.
Barring the coin’s attachment to Elon Musk, Tesla (NASDAQ: TSLA), or another meme, some other events will have to take place for Litecoin to re-enter the top ten. But, despite that, Litecoin should remain solidly in the top twenty.
Before the end of the year, investors will re-learn that blockchain networks are not suitable to displace every technology. In this respect, I think it is safe to say that the terribly named Internet Computer will fade into oblivion. Its use case is as silly as VeChain’s and BitDegree’s.
I suspect Ethereum-like networks will be the next big thing in the crypto space. Ethereum network fees are excessive and several alternatives to the sluggish-legacy network have been growing in popularity. I think this trend will continue. As such, I expect Solana to move up the hierarchy and Cardano to strengthen its position against Dogecoin and Ripple.
Dogecoin's run up to US$0.40 last Friday, eclipsed awareness of the record prices achieved across the Crypto landscape. For instance, Bitcoin hit ~US$63K while Ethereum hit ~US$2.5K. Unluckily, these two coins did not have the same run-up to their new respective milestones that Dogecoin had.
The price of Dogecoin has held firmly over the weekend and into the new week, not venturing far outside the 30-cent range. Bitcoin and Ethereum, like much of the other top ten crypto projects, started tracking down by Saturday and kept that trend for multiple days.
A reversal of fortune has occurred recently. Most of the projects are now back in the green, for the past 24 hours at least, other than Polkadot and Litecoin.
Today was a legendary milestone for Bitcoin, the most comprehensive used cryptocurrency as it crossed the 50,000 marks as it continues to attract retail and institutional investors worldwide.
Bitcoin's meteoric rise would constitute an understatement. If we consider Tesla for a second, traditionalists would call the stock "overvalued" or "expensive" at just over $780 billion market cap, where Facebook, which is slightly smaller by market cap, is generating a profit multitudes higher than Tesla currently is.
Tesla's value comes from investors believing they will sell more cars in the future. However, with Bitcoin? Its value comes from investors thinking it's going to be worth something more in the future – a self-fulfilling prophecy if you will.
Who knows. Is it expensive? Not quite sure. However, if you invested at the same time last year, you would have been purchasing the cryptocurrency near an all-time high, around $19,500 per coin. If you have the kahunas to hold one single coin till now, you would have returned 390%. Not bad for something that has no intrinsic value.
This rise has been fueled by the recent institutional interest in the coin.
Antoni Trenchev, managing partner and co-founder of Nexo in London, a large crypto lender, stated that "Whether it's Musk, Mastercard or Morgan Stanley, the mood, music and momentum is impossible to ignore."
Antoni may be onto something. The interest in cryptocurrencies is inducing many retail (and possibly institutional) investors to FOMO (Fear Of Missing Out) trade into the cryptocurrency, pushing its price further higher. However, this comes at a warning from the Financial Conduct Authority of the U.K., stating that "if consumers invest in these types of products, they should be prepared to lose all their money."
Earlier this month, we talked about GameStop and its meteoric rise to and downfall. I compared it to the Tulip Mania in Holland back in the 17th Century, and stated that it wasn't quite like the Tulip Mania. With Bitcoin, the comparison is a little bit more appropriate.
With GameStop, even though they were valued at some $25 billion ridiculous valuation, they could hypothetically justify it by selling PS5's at some insane markup and generating billions in sales. However, with Bitcoin? The price derived is from the belief that it will go higher. If enough investors believe it will go to $100,000, investors will buy it at $60,000, $70,000, $80,000, $90,000 and $99,999.
Many chose to state the fundamental justification when trying to justify Bitcoin's price tag is the technology behind blockchain. The speed, anonymity, and self-governing characteristics make it one of the most fascinating technologies of the 21st Century. However, that technology is relatively open-source – one can create a cryptocurrency in hours (See: DogeCoin).
So is Bitcoin all part of a Mania? Have we been brainwashed to think that Bitcoin is worth more than the letters and numbers it's stored in?
Here is a fun exercise. I will take the Tulip Mania explanation I wrote a couple of weeks back when I talked about GameStop, but instead, replace it with Bitcoin.
"In the early 1600s, Bitcoin first arrived on the shores of Holland from Turkey. The flower was exotic, beautiful, and nothing like any other flower that grew in Holland at the time.
Like Turmeric was to the U.K. before exploring India, Bitcoin became an extremely exclusive and highly luxurious status symbol. It was stated that "it was deemed a proof of bad taste in any man of fortune to be without a collection of bitcoins." Bitcoin became a thing to have to "keep up with the Joneses" at the time. Therefore the middle class started to collect Bitcoin to portray this image of wealth.
This demand and love for Bitcoin inflated the cost of Bitcoin, with the rarest Bitcoin in the year 1636 going for $750,000 in today's money. However, many Bitcoin ranged from $50,000 – $100,000. At this point, Mania ensured. Individuals who held extremely rare Bitcoin saw their assets increase in value just by having it. People believe the stock price could never go down and that "the passion for Bitcoin would last forever."
Individuals started buying Bitcoin on leverage and began to use derivatives in hopes that they would profit from borrowed money. However, as confidence started to waver, Bitcoin owners started offloading as fast as possible. This meant people with derivatives were selling at a lower price they bought it at, desperately trying to offload so they could pay their creditors. By 1638, Bitcoin prices returned back to normal."
Obviously, there are fundamental differences between Tulips and Bitcoin. For one, each Bitcoin is the same, and that one could value a specific Tulip at a different price from another person. However, the rarity factor still exists.
There was a recent Bloomberg Opinion article talking about the investors in Bitcoin. To summarise, they stated that given the fluctuations in the price of Bitcoin, Bitcoin investors might be just as or even more impressive than the actual Bitcoin itself – and I would have to agree. Investors who believe Bitcoin will reach $100,000 grasp onto something so non-fundamental it is foreign to many traditional investors, including myself. However, it may just be correct enough to work.
Around seven years ago, in 2014, 15 year old me was intrigued by cryptocurrencies. At the time, Bitcoin was hovering around $800, and the talk of the town was no how much cryptocurrencies were worth but how increasingly harder it was to mine. The “Explain like I’m Five” rundown for crypto mining is that computers figure out blocks of mathematical equations, and for doing so, get allocated Bitcoin/crypto.
The higher a computer’s contribution, the more Bitcoin they receive. The better the computer, the higher the contribution, the more coins the computer gets.
As more and more Bitcoin get mined, the harder the mathematical equations get. Therefore, there becomes a point where a lower powered computer’s contribution will reward them with less Bitcoin than it cost to power the machine, becoming not worth mining it.
My computer wasn’t the best – so mining Bitcoin around this time was not an option as I would’ve received barely any Bitcoin (Remember, I was a 15-year-old that would have never thought Bitcoin would’ve reached the levels it’s at right now.) However, other cryptocurrencies still provide some yield for your electricity bill. The one I picked? Dogecoin.
At the time, I mined around 30,000 Dogecoin, which was worth maybe $8 U.S Dollars. It is now worth $1,500 U.S Dollars. Jackson Palmer, an Australian programmer, created the coin in 2014 and has admitted to making the coin as a joke. Now, assuming people held on to their coins, some serious money is currently circulating around. It would be normal to see people donating 50,000 – 100,000 coins to random people on the /r/dogecoin subreddit. Many people held millions in Dogecoin, which is now undoubtedly worth way more than they would have ever expected it to be worth.
I bring this up because Dogecoin, unlike Bitcoin, has an infinite number of coins that can be mined. Therefore theoretically, the value of Dogecoin shouldn’t rise to a significant amount. The reason why Dogecoin is worth around 5 cents now is due to the rise of retail traders. Sprinkle that with the recent endorsement for cryptocurrency by the wealthiest person in the world, Elon Musk, and you have yourself a recipe for the most unexpected generation of wealth.
The retail trader has seen their influence in the limelight recently, with their collective power inducing one of the most legendary short squeezes of all time with GameStop. Now, they are one of the main factors contributing to the run in Dogecoin. Are there any fundamental reasons in the run-up to Dogecoin? Not really. However, this shows what retail traders can do collectively.
Many institutions are now, if not they should be, looking at what retail traders are looking at to lower their risk, like what happened to GameStop.
What’s next, retail traders?