Litecoin For Beginners

Written by Edward Gonzales

July 2, 2021

Litecoin is one of the oldest cryptocurrencies that exist, however it tends to often be overlooked as a store of value. Some people say Litecoin doesn’t stand a chance at replacing Bitcoin, but that was never the intention by its creator. In this article we will take a bit of a closer look at Litecoin history and its fundamentals. 

Background 

Litecoin is a cryptocurrency similar to Bitcoin. The two coins have some similarities as well as some differences. While Bitcoin’s creator still remains anonymous at the time of writing, we know the creator of Litecoin to be Charlie Lee. Lee is active to this day in the project as well as on his twitter profile. He is a former employee of Google as well as Coinbase displaying he has a well documented background in tech. Multiple interviews and publishings have cited Lee stating he never wished to compete with Bitcoin. Instead he had hoped Litecoin would be equal to digital silver as Bitcoin is equal to digital gold. His vision to create a lighter version of Bitcoin is what presented the idea for the name “Litecoin.” 

Litecoin is an open sourced decentralized digital currency. The Litecoin network allows borderless and near instant transactions anywhere in the world between a sender and receiver. The fees to transfer Litecoin are far cheaper than that of most cryptocurrencies from most exchanges and wallets. The Litecoin network makes use of blockchain technology, similar to Bitcoin. A blockchain is basically a public ledger that allows anyone to view what’s occurred. Blockchains store data in a way that can not be infringed and allow everyone to trust that the network is secure. Founded on October 7th of 2011, Litecoin remains prevalent in the top 10 cryptocurrencies to this day.

Coin Limit

There are many different cryptocurrency projects in the space today, a lot of which have varying coin limits. Litecoin has a coin limit of 84 million. This means that there will only ever be 84 million Litecoin in circulation. This is four times the value of Bitcoin’s 21 million coin supply. There are about 67 million Litecoin in circulation at the time of this writing. Having a finite amount of coins over an infinite amount of coins  gives the asset a deflationary property. Other coins with infinite supply or even something like the USD can be considered inflationary assets.

Block Properties

The average block time of Litecoin is about 2.5 minutes. This is approximately ¼ the time of Bitcoin’s 10 minute block time. 

There is a notable event often mentioned when discussing Bitcoin referred to as “the halving”. This is when the block reward is reduced for miners. The reward for Litecoin distribution is cut in half every 840,000 blocks. This is approximately 4x to that of Bitcoin’s 210,000 blocks. 

Algorithm

Bitcoins algorithm makes use of the SHA-256 algorithm, while Litecoin makes use of scrypt algorithm. The two are made of very similar code. They are so similar in fact that developers often use Litecoin as a sort of testnet to see if an implementation will be successful. If the implementation is successful it is typically applicable on the Bitcoin network. There is an established bottom in price action when it comes to Litecoin and a lot of people think that most of Litecoin’s value comes from its testnet features. Litecoin is a reliable place to test things that could one day end up on the Bitcoin network. 

Use Case

The focus of Litecoin at this time of writing is to be more of a payment method rather than a store of value. It’s quick block time allows users to transact money between one another nearly instantly and without the need for a third party. These transactions are verifiable on the public ledger at any time, so payments can be verified quickly. Litecoin’s cheap transfer fees allow regular users to access the network to send money to any corner of the world remotely with just a few clicks. Litecoin can be used as payments for goods and services. There are no fees to receive Litecoin which makes it easy for vendors to accept. 

Marketplace

There is a large marketplace available to buy, sell, and trade Litecoin. Litecoin’s market cap at the time of writing is approximately 9 billion. There are plenty of reliable exchanges you can interact with in order to swap fiat currencies like USD for LTC. There is plenty of liquidity flowing through Litecoin to consider it a reliable means of transferring value. 

Technicals

Looking through the price action history of Litecoin there are observable peaks and bottoms. Popular cryptocurrency exchange Kraken has recorded price data since late 2013. We will be cross referencing Krakens records to report on Litecoin’s technicals.

In the photo above we can see that the coin has seemingly abandoned its previous price bottom and created a new floor of approximately $21. The previous all time high of Litecoin during the 2017 rally listed approximately $367 dollars. During the most recent bull run we saw Litecoin’s price shoot up to prices as high as $413 before facing rejection. This creates a price range for us to make decisions within. Although it is a large range, you can further analyze the data on smaller time frames to take note of smaller price movements. 

The white line between the two blue lines represents a sort of support price. Zooming in on smaller time frames you can see this white line be treated as support/resistance in previous scenarios. 

Taking a closer look at Litecoin’s candlestick data you can see that the price fell suddenly and sharply out of the ascending channel it had arranged for itself. We are currently seeing a wedge formed in price action. Price seems to be ranging from a support zone and showing rejection along the red downward sloping line. 

Litecoin has been around for many years and has a stable foundation to stick around for many years to come. You can visit our website to learn more about Litecoin and other cryptocurrencies.

By viewing any material or using the information within this publication you understand that this is general education material and you can not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here. Trading cryptocurrency has potential rewards, but also potential risks. You must be aware of the risks and be willing to accept them in order to invest in the markets. Only trade with funds you can afford to lose. This publication is neither a solicitation nor an offer to buy/sell cryptocurrency or other financial assets. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.

Written by Edward Gonzales © Crypto University 2021

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